student accommodation in sydney on broadway
Image: The Property Tribune.
  • Forecasts show only 7,770 new PBSA beds will become operational by 2027.
  • PBSA rental growth in Sydney to standout over the next five years.
  • On-campus supply quickly absorbed as market looks to private sector.

The student accommodation sector is expected to remain significantly short on supply, particularly as international student arrivals are forecast to rebound past 2019 levels, next year.

Savills‘ latest Australian Student Accommodation 2023 Report has revealed that there is an easing pipeline of PBSA development forecast to be delivered over the next three years, with the total number of new student beds dropping by more than 50% compared to the last three years.

Among other key themes expected for 2024 and beyond:

  • Steady rental growth,
  • Shifting away from the inner-city suburbs of Sydney and Melbourne, and
  • Undeterred investors.

Sydney to outperform

The report forecasted that PBSA rental growth in Sydney will standout from other capitals over the next five years, principally due to popular universities such as University of Sydney and University of New South Wales, along with an influx of lifestyle students, and a historic undersupply of accommodation.

Brisbane rents, however, are expected to slow over the next half-decade due to two factors: new supply to come online from 2026 and affordability ceilings being reached.


Forecast 5 Year CAGR to 2029










Source: Savills.

The report also found on the supply side, the post-Covid recovery of student numbers is strong.

In the year to September 2023, there were 618,350 international student arrivals to Australia, up 88% from the previous year. Savills said international student arrivals are forecast to surpass 2019 levels in 2024 and grow to close to one million by the end of the 2025 academic year.

“This boost in international student arrivals comes after Australian universities advised a return to in-person course delivery this year, with the Chinese government also requesting its students to return to destination universities,” said Savills director of operational capital markets, Paul Savitz.

“This catalysed a rapid bounce-back in demand for higher education in Australia, which has caught many universities by surprise.”

A low value Australian dollar is also expected to be another factor enticing students to Australia. The report notes soft economic conditions is expected to continue keeping the Australian dollar down for the remainder of 2023, with the value lifting to potentially 80 US cents by the end of 2025.

Private rentals picking up the slack

The continued lack of PBSA is also leading to many students entering the private rental market, putting pressure on sector seeing vacancy rates return to record lows.

As universities look to increase their intake of international students, the search for accommodation will intensify.

Currently, there are almost 79,000 PBSA beds available across the inner city areas of Australia’s eight capitals. An additional 4,907 beds are becoming operational this year.

“A combination of a lack of knowledge, business case, land, and capital from the majority of universities is restricting the delivery of new on-campus accommodation,” said Savitz.

“The decisions, resources and outlook of private investors will therefore drive PBSA growth, and these investors must navigate economic, planning and delivery challenges, respond to shifting student demographics, and also champion environmental sustainability. Their choices, particularly regarding new developments, financing, and adherence to ESG principles, will ripple across the sector,” he added.

Heading further afield

The main focus for PBSA has been on Sydney and Melbourne over the past three years. This was driven by their proximity to Group of Eight universities.

Almost 100% of new beds scheduled to become operational in 2024 and 2025 are in Sydney and Melbourne – an indicator of real estate fundamentals and investor preferences during the pandemic.

“Land values in amenity-rich locations close to universities and public transport have maintained their value, impacting on the feasibility of schemes alongside build cost inflation and planning delays,” said Savitz.

Locations further out are now catching the eye of investors, who are seeking to unlock greater value in locations where market fundamentals are strong and demand and supply are imbalanced, but with no Group of Eight university nearby. According to the report, Savills expects a more balanced delivery of new student accommodation away from the global gateway cities of Sydney and Melbourne.

Australia’s changing economic landscape creates the need for careful consideration of investment and development strategy in the short term, said Savitz, with some investors shifting their focus towards locations with higher yields in the medium term.

Examples of investment in high-growth locations include Sydney’s Macquarie Park, where a combined total of over 1,200 student beds are earmarked for completion by the end of 2026. Nuveen’s site purchase in Macquarie Park will see 488 beds delivered, with Centurion currently gaining planning approval for a further 732 student beds in the same suburb.

Western Australia has recently seen Australian Unity team up with investment manager MaxCap Group to develop a $1 billion portfolio of student accommodation facilities as a seed asset for that venture. The partnership has seen the purchase of a site close to the new ECU Perth CBD Campus, which will deliver 732 beds.

Unfortunately, not much supply is on the horizon, with Savills forecasting just 7,770 new PBSA beds across Australia’s capitals by 2027 and investor-grade residential apartment developments, an alternative for students, falling to record lows.

The PBSA forecast represents a 52% decline compared to the 2020-2023 period and a 64% fall from 2018-2020 levels.

Positive signs for the future?

The student accommodation sector remains a favourite among investors, despite economic uncertainty, higher construction costs and the elevated cost of debt, according to the report. This is because the student accommodation sector offers consistent returns.

“Unlike many other real estate sectors, rents can be rebased every six months, or even every semester – keeping pace with inflation and adapting to a shifting economic environment,” said Savills head of operational capital markets, Conal Newland.

“These features will maintain the comparative attractiveness of the sector for investors and may lead to a further rebalancing of real estate portfolios away from commercial assets and towards residential assets such as PBSA, supporting the sector’s continued growth.”

Indeed a focus on living sectors is one of the seven predictions made by experts for 2024.

Another positive for the sector is an uplift in rebooking rates, according to Savills.

While before the pandemic, rebooking rates were around 30%, on-campus and off-campus providers now report significantly higher rebooking rates of up to 85%. Savills says the new norm appears closer to 40-45%, pointing to an undersupplied market.

This is good news for PBSA operators, as higher rebooking rates add additional revenue to the NOI profile due to less rental leakage to offshore channel agents or booking platforms, noted Savills.

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