The student housing market
Global demand for tertiary education has been on a rising trend, underpinned by a need for more skilled labour to support growing economies and socio-demographic trends of an increasing university-aged population and rising incomes. These trends have been most prominent in the Asia Pacific region (APAC) as compared to others. Transport connectivity between countries has improved with globalisation, encouraging international travel. Demand for student housing has also grown on the back of greater willingness and ability to travel internationally for quality education. While global mobility of students has been restricted due to the Covid-19 pandemic, it is likely to rebound once the situation stabilises and international travel restrictions are relaxed, giving resilience to the student housing sector.
Before the pandemic, student housing had been an increasingly popular alternative investment asset class, reaching a record US$18bn in 2019 (Australian student accommodation 2020 report [2020], Savills, savills.com.au.research_articles/167771/198722-0). Despite initial concerns about Covid-19’s impact on demand for shared spaces, the asset class has proved resilient in the face of the pandemic and the resulting economic downturn, especially in markets where borders were more porous.
Positive demand and supply dynamics underpin the student housing market
Based on US data, student housing has a limited correlation with the wider economic trends (Figure 1). Its demand is often supported by longer-term fundamentals such as demography and aspirational want of higher education. University-aged cohorts (aged 20 to 24) are expected to increase from 597 million to 635 million between 2020 and 2030, a growth of over 0.5% per annum (Fiure 2) globally. The rise in the global middle-class population also supports higher education participation rate, as the middle class typically invests a more significant proportion of their income on their children’s education (H Kharas [2017]. ‘The unprecedented expansion of the global middle class’, Brookings, pg 2). The middle-class growth is expected to be the fastest in APAC compared to Europe and the Americas, rising from 2 billion in 2020 to an estimated 3.5 billion by 2030 (This chart shows the rise of the Asian Middle Class. (2020). World Economic Forum, weforum.org/agenda/2020/07/the-rise-of-the-asian-middle-class).
