This plan, which aims to redistribute international students across Australian institutions, sets a cap of 270,000 new enrolments. While this represents a 6.65 per cent decrease compared to the year to May 2024 figures, it still surpasses the numbers recorded in 2023 and pre-COVID highs in 2020, which were below 250,000. Over the past two decades, international student commencements have grown steadily, averaging an annual increase of 9.57 per cent. This growth culminated in record-high enrolment numbers, peaking at over 810,000 students this year. The new distribution policy, while potentially challenging for some universities, could offer short-term relief to the strained housing market.
Rental markets in most Australian capital cities have faced significant pressure, resulting in low vacancy rates and rising rents. This has raised affordability concerns for many Australians, particularly as new housing supply has struggled to keep pace with population growth. Purpose-built student housing currently offers 76,500 beds across more than 200 facilities, catering to a fraction of the 1.4 million students enrolled in Australian universities annually. The tight rental market has led to increased demand for student housing from domestic students, a sector traditionally dominated by international and interstate students. Many local students are opting for share housing or staying at home as more affordable alternatives.
Student housing providers continue to report high occupancy rates and growing returns, driving ongoing construction of these facilities. Seven major student housing projects are currently underway across Australia, expected to add approximately 2,200 beds to the market in the next year, primarily in Sydney and Perth. The development pipeline projects an additional 7,000 rooms by early 2027. The appeal of student housing in Australia is expected to persist despite the potential cap on international student numbers. This market is predominantly driven by offshore groups both developing and investing in these assets. The continued growth in overall student enrolments, projected to exceed 1 million by 2027, is likely to sustain interest in the student housing sector.
The policy changes aim to distribute the student population more equitably, which will affect universities differently. Some institutions in Victoria, NSW and the ACT may see reductions in international student numbers. Other institutions, such as Charles Sturt University, University of Sunshine Coast, and Notre Dame University, are set to potentially double their intake. Universities in Tasmania, Adelaide, and Western Australia also anticipate growth. These shifts present new opportunities for student housing providers to expand into emerging markets with limited existing purpose-built facilities.
In the 2023/24 financial year, purpose-built student housing transactions in Australia totalled just over $700 million, significantly lower than the $3 billion recorded in 2020. Cross-border buyers continue to dominate the market with Blackstone being a prominent purchaser, alongside Singaporean and Canadian groups this year, keeping yields within a competitive range from sub 5 per cent in key markets up to 6.75 per cent,. The student housing sector in Australia appears poised for continued growth and investment, despite the proposed cap on international students. Opportunities for developers, providers, and investors are likely to emerge in markets with limited existing exposure but competitive residential markets, such as south east Queensland and Perth.
While the proposed cap on international students may affect some universities, the student accommodation sector is likely to show resilience. The ongoing demand for purpose-built student housing, coupled with the overall housing shortage and the redistribution of students to new areas, suggests that the sector may continue to thrive and adapt to these policy changes. The underlying mismatch between student-suitable housing and the growing student population will likely continue to drive interest in the student housing sector in Australia, presenting opportunities for both development and investment in this dynamic market.
