Student housing in demand
The archetypal grotty student flat may never disappear entirely but it’s becoming a more endangered species.
Demand for student rental accommodation is strong in all centres and evident by rising rents -– some providers have increased 2018 room rates by 5 per cent, well above inflation.
Whillans Realty Group analyst Brendan Keenan is predicting a development wave of new purpose built student accommodation, partly fuelled by the Government’s new free education for first-year tertiary students.
‘‘A new class of private providers and investors has stepped in to capitalise on this,’’ he said.
‘‘They’re enticing students with private ensuites, flatscreen TVs, shared study space, rooftop barbecue areas and gyms.’’
Some developers had gone as far as offering 24/7 concierge services, on-site cinemas, free WiFi, and private bars decked out in the latest designer furniture.
‘‘The days of old-style university halls of residence and shoddy student flats are now officially over,’’ Keenan said.
The University of Auckland has one bed available for every 10 students, and reportedly receives twice as many applications as there are beds available.
AUT, New Zealand’s secondlargest university, has just one bed available for every 28 students, Keenan said.
‘‘Over the past decade, rental growth for one bedroom apartments in the Auckland CBD has out-performed the city’s prime industrial and office markets.’’
About 62 per cent of all-purpose built student accommodation beds in Auckland are in the CBD.
The development pipeline of student accommodation includes four projects currently under construction in Auckland, and will deliver 1646 beds by 2020.
That will boost the total number of such accommodation to about 6600 beds.
However, the new supply would still not meet demand, Keenan said.
The University of Auckland had identified that it needed to provide 7500 beds by 2026, or more than the entire existing supply of beds across the city.
An overstretched construction industry and funding shortages was making it difficult for local developers to deliver new projects,
In Wellington, three student blocks leased to the university were placed on the market by an Australian investment called Forum in 2016.
But only one sold for about $8 million: Education Hse at 178 Willis St.
Colliers’ managing director in Wellington Richard Findlay said the 2016 earthquakes had interrupted the marketing of the other two student blocks which had a combined value of about $50m – McKenzies Apartments at 222 Willis St and Cumberland Hse at 237 Willis St.
Student accommodation was still a popular investment and about half the 13 hostels owned or leased to the university were refitted office buildings, ‘‘so they’re really important to the fabric of Wellington’’.
Internationally, student accommodation has become one of the fastest-growing and most sought-after commercial property asset classes, Keenan said. Universities were struggling to match demand.
The international trend has seen increasing numbers of students from middle class Asia countries to New Zealand and Australia, helping offset tuition fees for locals, but also adding to accommodation demand.
Real estate investment trusts, pension funds and private equity groups were attracted by the counter-cyclical nature of student housing.
Tertiary enrolment numbers typically increased in tough economic times.
‘‘Student housing has now become synonymous with the aged-care, commercial and industrial property investment sectors,’’ Keenan said.
The primary measure used by investors was the ratio of existing beds to students. The UK had the world’s most mature student accommodation market, with one bed for every four students.
However, New Zealand offered just one bed for every 14 students, making it an attractive investment destination, and Australia had only one bed available for every 17 students.
‘‘This has ignited a building boom of new student housing projects, with thousands of new beds under way.’’
"The days of old-style university halls of residence and shoddy student flats are now officially over.'' Brendan Keenan