The affordability of Australia's cities and the global standing of its universities have contributed to a rise in the country's student accommodation sector, according to JLL.

JLL’s Australian Student Accommodation Investment Review & Outlook for 2019 states that, by the end of 2019, there will be 86,000 beds in Purpose Built Student Accommodation (PBSA) across Australia’s six major higher education markets.  

The report estimates the total supply in the six major higher education markets will be over 100,000 beds by 2022. 

At a glance:

• JLL’s Australian Student Accommodation Investment Review & Outlook for 2019 reveals the sector is shifting from development to the operational phase. 
• The report estimates there will be 86,000 beds in Purpose Built Student Accommodation (PBSA) across Australia’s six major higher education markets. 
• According to the report, Melbourne will account for over 50% of the expected supply between 2020 and 2022. 

JLL’s Head of Alternative Investments – Australia, Noral Wild said there continued to be a compelling investment case in the student accommodation sector.

“The cost of living and global rankings are key drivers of demand together with a strong and stable economy," she said.

”DFAT figures show the higher education sector was the third largest contributor to the Australian economy in 2018, accounting for a total of  67.3 per cent
 
“For investors in the sector, buying assets to gain scale in the market is still key.

“There is an institutional appetite emerging for prime operational assets including large portfolio opportunities that allow new entrants in the market to gain immediate scale."

Figures from the United Nations Educational, Scientific and Cultural Organization, Australia is the world’s third most popular destination for education, accounting for 7 per cent of the world’s 5 million foreign students.

According to JLL, a lower Australian dollar is improving affordability for international students, which is leading to the growth in enrolments while economic growth is fueling demand for higher education.

Ms Wild said there are three phases of the capital investment cycle for investors to consider when assessing the student accommodation sector.

“As the prime Australian PBSA market moves from the development cycle into the operational phase, the capital shifts from opportunistic to value-add and core.

“Australia is currently in the early stages of the operational phase, so we still expect to see yield compression across the sector over the next 3-5 years as assets and broader portfolios are taken to stabilised rates of occupancy with proven performance before core capital enters the market.

“The same cycle was seen in the more mature UK and US markets and we expect to see the Australian prime PBSA market follow these trends."

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