Nicholas Spiro

The View | Australia’s student housing woes won’t be solved by cutting visas

Planning restrictions are constraining supply in all sectors of Australia’s residential property market, driving up prices and rents, but the lack of a clear way forward on student housing threatens to hold back the potential of a sector that is increasingly important to the Australian economy

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A construction site for a student accommodation building near the University of New South Wales in Sydney seen on February 17, 2023. The Australian government has taken measures to reform issues around student visa issuance, but the dire shortage of affordable student housing has yet to be addressed. Photo: Reuters

Nicholas Spiro

Published: 5:30am, 26 Mar 2024

Every property sector has its strengths and weaknesses. Right now, the office market has the biggest problems, mainly because of the pandemic-induced shift to hybrid working. On the other hand, the “alternative sectors”, which include data centres and laboratory space for life sciences companies, have a lot going for them.

Yet it is the “living” sector – which comprises multifamily or build-to-rent (BTR) properties as well as purpose-built student accommodation (PBSA) – that is the most resilient segment of the commercial real estate market, along with logistics properties.

In the Asia-Pacific region, Australia’s PBSA sector enjoys some of the best fundamentals. A confluence of factors underpins its strong performance, but the one that stands out is the fierce demand for student accommodation from international students.

Australia’s universities are a magnet for foreign students, especially from Asia. The share of international student enrolments in higher education is much higher than in other advanced economies. At some universities, it exceeded 40 per cent in 2022, according to Australia’s Department of Education.

Before the eruption of the Covid-19 pandemic, international education services were the country’s fourth-biggest export. While Chinese students still account for the largest share of foreign students studying in Australia, source markets have diversified significantly in recent years.

This is a boon to the PBSA market, which was just starting to establish itself as an important sector when the pandemic struck. While the number of temporary higher education visa holders plummeted in 2020-21, the dramatic rebound during the past two years has breathed new life into the student housing market while at the same time exacerbating severe supply constraints in the sector.