The Australian Student Accommodation Investment Review and Outlook 2019 report found Australia continued to have a substantial undersupply of beds to students, with only around 86,000 beds for its more than 1.5 million domestic and international higher education students.

“We haven’t had the developers and investors in the Australian market to date”

“The key demand driver for PBSA is the continued strong growth in higher education international students choosing to study in Australia,” the report said.

According to the report, Australia had some of the world’s lower market penetration figures, coming in as low as 7.9% for Perth, which indicated a need for further PBSA development.

“We haven’t had the developers and investors in the Australian market to date,” explained JLL’s head of alternative investments Noral Wild.

“They’ve been focused on the other main locations being the UK and other parts of Europe. [They] came to the realisation that Australia had performed very well in its capture of international students and were able to move their business models to here.”

Wild told The PIE News that while there had been an increase in the number of PBSA providers over the past ten years in Australia, much of the work remained “greenfield development”, with the time needed to find a location, receive permits, and build creating lag.

Of the major cities, Canberra, had the best market penetration at 28.7% – however, Wild said this was primarily down to it being more similar to the US and UK’s college towns, resulting in an unusually high domestic occupancy rate.

Within the nation’s capital, domestic students had a market saturation of 21.9%, while the next highest, Brisbane, only registered 7.4%.

Brisbane had the second-highest market saturation overall at 15.5%, and 34.2% for international students, which Wild said was due to incentives made by the city council to invest and build PBSA.

“We probably saw supply coming through a little bit faster than the other states to take advantage of those incentives, and probably acquiring sites in Brisbane was a little bit easier,” she said.

Sydney and Melbourne meanwhile, which host the lion’s share of international students, had the third and second worst market penetration rates around the country, despite also having the highest number of beds.

“Sydney has really lagged because it probably wasn’t that the sites weren’t available, but the price of the site was just prohibitive, and they were always outbid by hotels or residential developers,” Wild said.

“But based on some conversations with some of the owner-operators and developers in the market, I expect we’re going to see a lot more announcements in the next year in terms of sites that they’ve been able to get their hands on in Sydney.”

According to the report, investor yield is expected to decline over a short period to just below 6% as the sector moves from its development cycle, during which owner/operators develop their capabilities, to the operational and stabilised phase.

“If we look towards the UK as some guidance, because we’ve very much followed the trends of the UK, they’ve seen real tightening of yields over the last ten years, and I think we’ll follow in that same trend,” Wild said.

“Sydney has really lagged because the price was just prohibitive”

Among the risks investors face, Wild said occupancy rates were a primary concern compared to commercial properties which have more long term lease periods with better-outlined tenancy requirements.

The growing number of international students, however, mitigated those risks, Wild continued and said that the increasing disparity between supply and demand meant there were substantial opportunities for further PBSA investment.

In mid-2019, Urbanest Australia announced it was looking for a new owner.