Australia and Poland top the list for student housing yields

KUALA LUMPUR: Australia and Poland currently offer the highest prime net student housing yield at 6%, according to global property firm Savills in their latest “Global Student Housing Investment” report.

The two countries are followed by the US (5.80% yield), Italy and Portugal (both 5.50% yield).

The firm said in a recent press release, that the continuing attractiveness of the asset class in multiple countries is driven by a combination of the increasing number of international students, demand/supply fundamentals and the sector’s counter-cyclical income stream.

Between 2007 and 2017, the number of internationally mobile students grew by 64% to over 5 million, according to the United Nations Educational, Scientific and Cultural Organisation, with the US, UK and Australia hosting the largest number of them.

Australia, said Savills, benefits from its proximity to major Asian source markets and has seen international student enrolment into higher education rise 41% between 2012 and 2017.

In mainland Europe, international student numbers are rising rapidly as well.

Students are attracted by English-taught programmes and lower cost of tuition compared to, for example, the UK and the US, said Savills.

“Despite a rise in student numbers, and in turn investments, student accommodation remains largely undersupplied at the national level,” it said.

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, Savills added.

“Student accommodation has evolved from an alternative asset class into a mainstream investment which now attracts a variety of global institutional investors such as GIC which is Singapore’s sovereign wealth fund, the Canada Pension Plan Investment Board which is Canada’s largest pension fund, and the world’s largest insurer, Allianz,” said Savills Worlds Research director Paul Tostevin.

However, Tostevin added, although high income returns attracted the first investors, the sector has matured and yields have come in, investors are now drawn to student housing’s countercyclical 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, said: “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 alternatives (student) as well as the private rented sector, and logistics, both outlying performers in the last 10 years.”

This story first appeared in the EdgeProp.my pullout on May 24, 2019. You can access back issues here.