Country comparison

Opportunities for pioneers in the student housing sector have never been greater, and significant potential exists in markets that are further behind on the development curve or in less well-developed markets.

We profile three of the fastest growing student housing markets: Australia, the Netherlands and Germany. We have also summarised the current state of six other major European markets, and compared key attributes of major student housing markets across the globe.

^{Source: Savills World Research, national education statistics services, IMD, UNESCO}

A fast-growing student market with a rapidly expanding PBSH sector

Australia is a popular destination for international students, particularly from Asia. China and India together supply nearly 40% of international students, an increase of more than 13% and 15% respectively in 2015. Total higher education enrolments grew by 2.7% over the same period.

Growing demand is set against a general shortage of supply. The provision rate stands at 6%, which is low compared to mature markets such as the UK at 24%. In response, a number of universities have commenced on-campus procurement projects and private operators are rapidly expanding their pipeline.

More than AU$2 billion of capital has been earmarked for development projects in student accommodation since the start of 2015. The top ten providers currently own a total of 20,136 beds and have a combined development pipeline of 15,469, representing an increase of approximately 75% on their existing stock.

Scaling up on new delivery presents challenges. Competing land uses, particularly from a strong residential sector, have pushed up land values and made development for PBSH unviable in some markets, most notably Sydney.

Federal and state governments have recognised the shortage as a limiting factor in the future development the country’s higher education sector (already Australia’s third biggest export, after iron ore and coal), and a number of strategies to enable new development are in the pipeline.

As an emerging market for student accommodation, transactional activity is limited as completed assets are generally tightly held. Savills research indicates there were just two transactions of operational residences totalling approximately. AU$90 million in 2015. In 2016, Infratil (HRL Morrison) secured a 30 year concession of ANU’s portfolio of 3,760 beds and UniLodge @ UNSW was transacted at a net initial yield of circa 5.6%.

A new student loan system has had limited impact on enrolment growth

The Dutch PBSH sector has grown rapidly since 2012 when regulations surrounding student housing development were eased. Development, first focused in Amsterdam (accounting for 40% of new beds in 2015 alone) has now spread nationwide, with particular concentrations in Groningen and Utrecht.

Total investment volumes reached close to €350 million in 2015; almost double 2014 volumes and over four times those of 2013.

Last academic year saw the replacement of grants with a loan system, comprising of three components: a loan, a student travel product and a supplementary grant (depending on parental income).

The new system has had a short-term impact on enrolment numbers, with a small dip in the 2015/16 academic year. This fall followed a surge in student numbers in the two years preceding the introduction of student loans as applicants took advantage of the last of the old regime. Encouragingly, provisional data suggests a recovery in numbers in the 2016/17 period, up by around 10% at research universities and 5% at universities of applied sciences.

While it looks unlikely that there will be any significant impact on student numbers in the long term, a higher cost burden may affect student spending. In a compact country such as the Netherlands, this could result in more students opting to live at home for study.

The Netherlands has become established as a destination for international students and numbers have almost doubled in the last decade. Growth in the international student population, now standing at 77,900, is well placed to offset any domestic decline in demand for student accommodation. The Netherlands already hosts the highest number of English-taught courses of any non-English speaking country, while tuition fees remain competitive by global standards.

^{▲ The Hague, Netherlands}

Private providers are making inroads into this large market Germany is host to 2.7 million higher education students. Unlike its European neighbours, no one city dominates. There are eight cities with more than 50,000 students, and a further 23 with between 25,000 and 50,000 students.

Germany is a highly affordable country in which to live and study, a factor that has sustained enrolment growth. Domestic student numbers have grown 39% in the last decade (but are set to stagnate due to demographic change), while international students now account for 12.3% of all enrolments.

In a bid to further boost German universities’ global profile, a federal initiative was introduced in 2005 to promote outstanding research by providing additional funding to selected elite institutions.

The semi-public body Studentenwerk dominates provision in Germany. In 2015, there were around 238,000 publicly subsidised beds, an increase of 15,000 additional on 2005 levels. Over the same time period the number of students grew by around 770,000, squeezing the supply imbalance further.

Set against this backdrop, private providers are making inroads. Private operators now account for around 22% of stock in the 30 largest university cities, a figure forecast to reach 29% by 2021.

Supply has been focused on cities where open market housing is most constrained. Munich is home to the largest amount of private purpose-built accommodation, but is set to be overtaken by Berlin, where 8,800 beds will add to the existing private stock of 1,600.

Private providers target the premium end of the market, with rents exceeding €500pm, double that of Studentenwerk. The price premium reflects superior quality and amenities and the fact 69% of private operator stock are individual apartments. The majority of Studentenwerk stock, by comparison, are rooms in shared apartments.

The German market has attracted the attention of international investors. The UK’s GSA group acquired a 1,000 unit portfolio focused on Frankfurt, Münster, Darmstadt and Dresden and further expansion is planned. Cresco Capital has announced plans to invest €300m in the sector.