Article | Intelligent Investment

Student accommodation on the fast-track to recovery

June 2022 saw a record number of international student applications for Australia. CBRE’s Sameer Chopra and Rosie Young take a closer look at the numbers and sentiment surrounding purpose-built student accommodation.

November 9, 2022

By Sameer Chopra Rosie Young


After one of the most challenging periods for student services around the world, demand conditions are starting to show renewed signs of life in Australia’s student accommodation sector. 

This fresh outlook comes as student arrivals spike and residential rents continue to rise with further improvements expected into 2023. International student arrivals hit 41,070 in September 2022 and are currently tracking at just 25% below the September 2019 level. 


A further jump is anticipated given the record number of international student applications received in June, with Australia retaining its position as an attractive destination for parents to send their children to study whilst other parts of the world are impaired by geo-political concerns and economic challenges.  Canberra and Perth are currently picking up a slightly higher share of student arrivals, which could have an outsized impact on these markets.  

In tandem, student accommodation rents, which were impacted by high vacancies during 2021, have rebounded faster than expected, with average rents tracking above 2019 levels in many locations. This trajectory is expected to continue into 2023 as rental growth continues in the private residential sector, making Purpose Built Student Accommodation (PBSA) an attractive alternative.  

As students typically favour living close to their campus, tight vacancies in the current residential market, particularly in inner-city locations, might also see students remain in student accommodation for longer. As these factors come into play, we’re expecting higher gross income streams for the student living sector over the next two to three years.  

Student accommodation operator sentiment  

Local PBSA operators have been ready and waiting for Australian borders to reopen. As one of the hardest hit sectors during the pandemic, Australia’s student accommodation industry is heavily reliant on international students. There is still a delay in returning Chinese students who tend to target higher price accommodation as well as being major occupiers in PBSA buildings. Operators have been able to pivot by targeting other nationalities and domestic students to achieve full occupancy despite the Chinese segment not yet returning to pre-pandemic levels. 

This new rebound has been stronger than what operators were forecasting with initial predictions of a return to 95% occupancy levels over two to three years. That bounce back is effectively happening already and much of it is driven by the tightening of vacancy rates in the wider residential market. While it’s important to note that students do have the option between living in apartments and PBSA properties, the low vacancy rates in the former means that there is more potential for student accommodation housing. Students that might have gone into the private residential market are now turning to PBSA instead. 

Smaller cities gaining more attention 

Research data indicates that smaller cities like Canberra and Perth are currently seeing a higher share of incoming students than other major cities like Sydney and Melbourne. This goes against the usual trend of international students seeking out their support network and amenities of bigger cities. The cost of living in Australia’s major cities could be a contributing factor, but it’s most likely to be an anomaly that will shift once Sydney and Melbourne student numbers recover. This evaluation is in line with the latest findings from the QS Best Student Cities Rankings 2023 which includes both Melbourne and Sydney in the world’s ten most student-friendly locations.  

Interest in PBSA on the rise 

In a post-pandemic world, PBSA is still seen as one of the most attractive alternative real estate asset classes.  What’s changed is where this interest is coming from, with the upsurge in enquiry levels coming primarily from overseas capital.  

This can be attributed to the fact that overseas capital is already exposed to key student markets in the UK, US, Canada and Europe. These investors understand the model and what it looks like, and they appreciate the strength of the Australian market and the opportunities it provides. 

During inflationary periods like today, this interest is compounded as student accommodation is viewed as more inflation-proof than some other assets. This is because student rents can pivot faster as lease lengths for student accommodation are generally between six and twelve month terms.  This allows operators to adapt their rental levels faster to keep up with the rate of inflation.  

Furthermore, when it comes to global recessions or economic decline, housing and education are two of the last areas people will cut back on. Enrolments tend to go up during economic downturns and if unemployment increases, people will look to education instead.  

Current student sentiment 

The living expectations of students heading into 2023 hasn’t changed much from pre-pandemic times. Research has repeatedly shown that students prefer to study on campus, even if there is the opportunity to learn online. The face-to-face learning experience remains crucial to student experience . Australia’s reputation as a top learning destination for students should remain intact thanks to the country’s high quality of life and economic and geo-political stability.  

Correlation between job vacancies and student accommodation  

Like many parts of the world, Australia has faced its own challenges with staff shortages across all industries. This is still the case, and it drives the conversation of whether there is a connection between job vacancies, international students and, ultimately, PBSA.  

We see a definite relevance. Employment opportunities while studying and postgraduate opportunities are key drivers for students – especially those looking across all international markets.  

In Australia, an international student needs to prove that they have a certain level of income and can support themselves. Coming out of the pandemic, there was a cap on the hours a student could work, but that’s now been temporarily lifted until 30 June 2023. Additionally, following the Jobs and Skills Summit in September, the Federal Minister for Education announced that post-graduation work rights for international students would be increased by two years from 2023. This should ensure Australia remains competitive against other global education markets such as the US, Canada and the UK.  

Nonetheless, local graduate opportunities and how easy it is to secure a placement for the job market are clear factors that international students will consider. By default, PBSA investors will also consider this to determine if Australia is an attractive location to invest.