Weekly Economic Update

Student housing (and student housing suburbs) are hot property.

It has been a tough couple of years for universities, and by extension student housing and suburbs close to universities. In 2021, Australia saw a net loss of more than 40,000 overseas students as a result of COVID. This resulted in population declines in pretty much every university suburb.

In around half of these suburbs this decline in the number of people living there led to unit rents declining significantly. Melbourne CBD lost nearly 6,000 people and rents dropped by $180 a week. Sydney CBD lost just over 1,700 people and rents declined by $140. For some areas however, a loss of people had minimal impact on rents and it is likely that wealth effects that drove up rental levels across Australia were able to balance out a loss of people. North Melbourne lost almost 1,400 people but rents rose by $90 a week. Nedlands in Perth lost almost 400 people but rents rose $80 a week.

While the impact of people leaving had a variable effect on rental levels, the impact on prices was minimal in almost every area. While people left all the university suburbs and more than half saw rental declines as a result, only four suburbs saw a decline in unit values. This suggests limited distress as a result of a loss of tenants and rental declines. It also shows a level of confidence during the pandemic that conditions would eventually go back to normal.

This confidence that conditions would return to normal now seems well placed. International students are returning and activity is returning to university suburbs again. It is likely we will start to record growth in rents and value in many of these locations within the next 12 months.

Meanwhile, the interest in student housing is extending to international investors. Singapore’s sovereign wealth fund, GIC, recently spent $568 million on a half share of an Australian student housing portfolio of 5,663 beds. Students are back, and so too is interest in the places in which they live.