According to Savills latest , Australia and Poland currently offer 6% prime net student housing yields, followed by the US (5.80%), Italy and Portugal (both 5.50%). The continuing attractiveness of the asset class in multiple countries is driven by a combination of increasing international student numbers, demand/supply fundamentals and the sector’s counter-cyclical income stream, according to the international real estate investor.
Between 2007 and 2017 the number of internationally mobile students grew by 64% to over 5 million, according to UNESCO, with the US, UK and Australia host to the largest number of them. Australia, benefiting from proximity to the major Asian source markets, has seen international student enrolment into higher education rise 41% between 2012 and 2017. International students numbers in mainland Europe are rising rapidly too, attracted by English Taught Programmes and lower cost tuition compared, for example, to the UK and the US. Despite a rise in student numbers, and in turn investment, student accommodation remains largely undersupplied at the national level. Student housing provision rates, the number of beds for full-time students, in major markets range from 34% in the UK to just 10% in Australia.
Paul Tostevin, Director, World Research, Savills, said: “Student accommodation has evolved from an alternative asset class into a mainstream investment which now attracts a variety of global institutional investors such as Singapore’s sovereign wealth fund, GIC, Canada’s largest pension fund, CPPIB, and the world’s largest insurer, Allianz. High-income returns attracted the first investors, but as the sector has matured and yields have come in, investors are now drawn to student housing’s counter-cyclical income stream. In economic downturns, demand for student housing tends to increase as students prolong their studies while they wait for the job market to improve, while those out of work return to university to upskill.”
Simon Hope, Head of Global Capital Markets, Savills, commented: “As part of the ever-burgeoning alternative sector, student accommodation continues to show strong total return performance. The sector is attracting global capital, developing branded platform operations which are in turn delivering strong rental and capital performance. Savills expects to see continued portfolio diversification from the MSCI 100 Real Estate Investors as they pivot their weightings in retail away from retail towards alternative (student) as well as PRS, and logistics, both outlying performers in the last 10 years.”