
Property consultancy Savills’ research has found that the purpose-built student accommodation (PBSA) sector faces a period of uncertainty and transformation, with challenges related to delivering much-needed new accommodation and regulatory changes.
Student accommodation remains significantly undersupplied in all key Australian markets, both the volume of accommodation on offer
and the diversification of the type and pricing of that accommodation. Developers and investors will continue to explore new locations in key markets driven by transport connectivity and proximity to student focused amenities.
The feasibility of delivering student accommodation remains difficult due to high interest rates, increased construction costs, rising operating expenses, and rental prices moderating after a recent surge. Despite construction difficulties, the PBSA sector remains resilient – developer confidence continues to rise, with 16 PBSA projects currently under construction across the capital cities.
This is the largest number of new PBSA projects under construction since the pandemic. It is also the first time since 2021 that builders have returned to PBSA sites in Brisbane, according to Savills.
“Throughout 2024, there has been a notable increase in discussions centred on fostering greater collaboration between the private sector and universities/colleges.
“This focus arises from the fact that the provision of new Student Accommodation, whether directly or indirectly, is closely tied to the ability of educational institutions to attract and educate international students.”
Australian Student Accommodation 2024 Report, Savills
Delivering new PBSA in Australia presents various challenges for developers and investors alike. These stem from a combination of regulatory, financial, environmental and logistical factors. The cost of building materials has risen sharply in recent years, exacerbated by global supply chain disruptions.
Additionally, Australia’s construction industry faces significant labour shortages, especially in skilled trades like carpenters, electricians and plumbers. This not only delays projects but has also driven up labour costs.
Increasingly, developers are adopting sustainable construction and design practices, with 5 Star Green Star becoming the baseline. This includes reducing the carbon footprint of building materials, improving energy efficiency, and incorporating renewable energy sources. While necessary for environmental and investment reasons, these green initiatives can increase the upfront cost of construction.
Savills states that rental growth over the past three years has been crucial to building confidence, offsetting some of the growing development assumptions such as construction, operational expenditure and financing costs. Since 2022, Perth Studio Student Accommodation rents have increased by a CAGR of 19.7%, Brisbane by 16.1%, Sydney by 10.4%, Adelaide by 6.7% and Melbourne by 6.1%.
“As we approach 2025, it is essential for all stakeholders – universities, developers, investors and policymakers – to remain agile and prepared for potential regulatory changes, while also considering the longer-term implications for Australia’s international education sector and its housing markets.”
Australian Student Accommodation 2024 report, Savills
Savills anticipates that rental growth will return closer to the historical trend over the next five years, with regional variations depending on the size of the future development pipeline. Despite construction difficulties, the Australian student accommodation sector remains resilient, with a strong demand for new beds.
Over the next three-year cycle, over 12,000 new PBSA beds will be added across the capital cities, based on projects that are fully funded and committed. Sydney will be the standout performer over that period, with 4,300 beds completing.
With international students entering the country faster than they were leaving, by mid-2023 the net migration impact from international students reached a significant 300,000, far surpassing the historic trend of 100,000. This happened to coincide with a period of rampant rental growth and record low vacancies across all residential markets.