In recent months, the return of international students has been highlighted as a major factor impacting the rental crisis across the nation. However, data released by the Property Council of Australia in April 2024 tells a different story. According to this landmark report: Myth busting international students’ role in the rental crisis, written in partnership with the Student Accommodation Council, international students make up only four per cent of Australia’s rental market.
According to subsequent information released by the Property Council of Australia this year, several factors are influencing the supply and affordability of rental homes nationwide. These include the increase in smaller and single-person households, intrastate migration, and the trend of converting bedrooms into home offices.
Although international students have returned to Australia post-COVID, the rise in rents does not correlate with their return. In fact, rents started increasing in 2020, a period when there was no international student migration and most students had gone back to their home countries.
Despite their minor share in the rental market, international students contribute an estimated $34 billion in export income across tuition fees and living expenses, injecting substantial revenue into the Australian economy. The Property Council of Australia report also stated that Australian students account for a further six per cent of the rental market, bringing the total students looking for accommodation near universities to an estimated 1.4 million individuals.
There are essentially two types of student housing: on campus accommodation, also known as purpose-built student accommodation (PBSA), and private rental housing, which includes units or shared housing.
On-campus purpose-built student accommodation
According to the Property Council of Australia report, the current pipeline of new PBSA developments will not meet future needs, and the projected 7,770 new beds due to become available by 2026 are insufficient to alleviate demand. PBSA offers high rental yields and caters specifically to university students with rent-per-bed models and shared amenities. Despite its advantages, PBSA has a limited supply and faces high demand, making it a competitive but potentially rewarding investment.
While the government has mandated universities to build more student housing, the challenges facing the construction industry suggest that alternative solutions will need to be explored to accommodate this vital demographic.
Private rental units and shared housing
Student rental units hold the potential to deliver high rental yields, but the initial investment will be vast, considering that most student apartments are located close to universities and often in city centres where property comes at a premium. The risk of having vacant units over the December/January holidays might outweigh the benefits of owning a valuable piece of real estate.
The most popular form of student accommodation in Australia is shared housing. These larger properties provide private rooms and shared facilities, including a kitchen, bathrooms and communal leisure areas, making them an affordable housing option for students.
Investing in older, second-hand properties that can be converted into student housing near universities, could present a lucrative opportunity with excellent rental yields. Additionally, these properties offer significant depreciation potential and other deductions, further enhancing cash flow.
Property depreciation refers to the natural wear and tear of a property and the assets within it. The ATO governs legislation that allows property owners of income-producing buildings to claim a tax deduction relating to this wear and tear.
Via the link below is a case study of a four-bedroom house, built in 1995 near a university in New South Wales, showcasing the impact on cash flow after claiming depreciation as a tax deduction on the rental property. The case study will further illustrate the difference in cash flow when the investment property is converted to student accommodation.
The original investment property was purchased by an investor in 2021 and subsequently rented out to a family at $615 per week until the end of 2022, when the family moved out.
Find our more information and Schedules showcasing various types of property via the following link:
Investment in Student Housing (bmtqs.com.au)
Supplier: BMT Tax Depreciation Quantity Surveyors
Always seek independent advice. Speak to your Financial Advisor, or accountant for financial advice.
We are here for all of your real estate goals:
- Ashley Williams – ashley@sellingsahomes.com.au – 0450 327 772
- Jo Wilkin – sales@sellingsahomes.com.au – 0402 217 827
- Glenda Vester – rentals@sellingsahomes.com.au – 0424 784 123
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