By Saurabh Goel
In the dynamic landscape of Australia’s real estate, the Purpose-Built Student Accommodation (PBSA) sector emerges as a focal point of 2023, grappling with a burgeoning demand-supply conundrum. As we delve into the current scenario, a report by CBRE, “Accommodating the growth in students” becomes our compass, revealing that an estimated 8,000 PBSA rooms will be introduced across the nation from 2023 to 2026.
Melbourne, accounting for 36% of Australia’s national PBSA stock, aligns with its substantial share of university students, particularly those from overseas. Sydney, not far behind, is anticipated to contribute nearly half of the new room supply through 2026. This includes significant developments like the University of NSW’s partnership with Iglu for 1,066 apartments and Wee Hur’s 411 beds catering to the University of Sydney and UTS.
Investment-wise, the PBSA sector has demonstrated resilience. Despite rising financing costs, rent growth and robust occupancy have cushioned PBSA yields globally. In the US and UK, yields have expanded by approximately 30 basis points from mid-2022 lows. In Australia, capitalization rates are expected to exceed those of comparable build-to-rent products by 50-75 basis points as transaction activity begins to burgeon.
The investment landscape in Australia’s PBSA sector is still maturing, with operational assets being tightly held. However, the market’s strong fundamentals, underscored by significant rental growth—PBSA studios have seen high teen rental growth over the past five years—signal a robust investment opportunity.
The sector’s counter-cyclical nature means it continues to perform well even as other property asset classes slow. Assets in the PBSA sector are increasingly viewed as a hedge against inflation, with education and housing being prioritized expenditures even as living costs soar.
The PBSA sector in Australia stands at a critical juncture in 2023. With a supply shortfall looming and international student numbers rebounding, the sector is ripe for investment and growth.
(Author is CEO & Co-Founder at amberstudent)