Large swathes of new purpose-built student housing are lying empty in Australia. Florence Chong reports
Newly completed student-housing towers are spread across Australia’s capital cities, and mostly in the key university city of Melbourne. Due to COVID-19, they remain unoccupied, awaiting the return of international students to Australia. Some cost as much as A$300m (€194m) to build, and will be burning holes in the pockets of investors that have poured billions into student accommodation since 2018.
Australia’s rapidly growing purpose-built student accommodation (PBSA) sector suffered massive losses as the coronavirus pandemic forced closure of national borders to foreign arrivals. It is ironic that Australia, the country that has possibly handled the global pandemic best in terms of public health, should have its student accommodation industry now fighting for survival.
If Australia’s borders do not reopen this year, the projected occupancy of available student accommodation is set to deteriorate from 50% in 2020 to 15% in 2021, according to Craig Carracher, who heads a working group representing the PBSA sector. Carracher is co-founder and CEO of Scape, the fastest-growing PBSA provider in Australia. The industry is projected to incur losses of A$1bn from projected revenue of just A$1.25bn in 2021, he says. “We have three buildings, paid for, developed and delivered, that are empty and mothballed. Each building we own is worth between A$100m and A$300m.”
Tomas Johnsson, CEO of Unilodge, Australia’s largest student-accommodation operator says: “Between operators of PBSA, there are 2,000 to 3,000 brand-new rooms in Carlton [an inner-city Melbourne suburb] just sitting there, empty. The industry has also offered up additional buildings which are normally committed to student accommodation [in a number of Australian states] to support quarantine programmes there.”
The crisis is not just about empty beds. There is a measurable impact on the broader economy, with the absence of foreign students causing staff shortages in hotels, cafes and businesses that rely on students as part-time workers.
The A$10bn privately funded PBSA sector is concerned that neither the government nor the Australian public relates to the crisis facing student-accommodation providers because its plight is being overshadowed by the more visible tourism and university sectors.
“The reality is that education in Australia has been a strong export market for many years,” says John Schroder, group managing director and CEO of Campus Living Villages, that owns and manages villages in Australia/New Zealand, the US and the UK. “Until COVID-19, the education industry generated A$41bn annually – it was the nation’s third-largest export earner.”
While student accommodation and universities have a symbiotic relationship, Carracher notes that the government has given A$1bn in support grants to universities during the COVID crisis – but no relief at all to student-accommodation providers.
Unlike the PBSA sector, universities have been able to manage through the crisis by increasing enrolments from overseas for online courses. Monash University in Melbourne has reported an operating surplus of A$259m for 2021.
But instead of assistance, says Carracher, the struggling PBSA sector has continued to be held to statutory charges like land tax. “Whether the building is empty or full, rented or not rented, we still pay land tax,” he says. “It is estimated that the industry’s land tax bill will be as much as A$100m in 2021.”
Over the past nine months, the PBSA sector has been trying to engage federal and state governments in its plan to bring back foreign students – fully-funded, including the chartering of aircraft and quarantine – without compromising permitted arrival numbers for returning Australian residents who have been stranded overseas.
The Federal education minister, Alan Tudge, has flagged 2022 as the earliest that international students will return. This is in contrast to the New South Wales (NSW) government, which is seeking to bring back up to 10,000 international students over the balance of 2021. It has invited tenders from accommodation providers to provide 600 quarantine places for arriving students.
But even if the NSW initiative succeeds, the figure still falls far short of the 125,000 students that the industry is seeking to bring back into Australia this year. With visas and international border control both coming under the Federal government – and central to the government’s border management is a cap on the number of arrivals at Australian airports – the industry has doubts that the states can achieve much.
“The best strategy would be a taskforce with representation from state and federal governments, health authorities, security agencies and the industry,” says Johnsson, “to work on a plan to return international students to Australia. In the absence of a holistic federal/state plan, the sector is engaging at state level and has seen a number of false starts in recent months. It now appears that NSW is the most likely state to get a pilot [scheme] up and running.”
Schroder says the border issue affects foreign students and domestic students alike. “The current issue in Australia has been the unpredictable closure of state borders, all for good reason,” he says. “It is hard for students – and their families – to make a decision if, for instance, they are in Western Australia and are accepted into a Victorian university. They cannot be confident that the domestic borders are going to remain open. As vaccinations take place and the great work of the state and federal governments takes hold, this is starting to correct.”
CLV, owned by Australian superannuation funds, is the second-largest student-accommodation owner in Australia. “Our villages accommodate both domestic and international students, and our focus during COVID has been on continuing to attract the domestic market,” says Schroder.
Johnsson says that in a normal year Australia has a net intake of 60,000 new international students every six months, to replace and exceed those going home and to take up new beds. So far in 2020 and 2021, Australia has missed three intakes and seems likely to miss the next intake in September.
He speaks of a three-year international impact on Australia. “We know for a fact that people are now signing up for university courses in the US, the UK and other countries because Australia is not an option, despite being a top aspirational destination.”
Schroder agrees. “In our UK villages, we are seeing students who might have come to Australia but have gone to the UK,” he says. “These students can’t get to Australia even if they want to. So they are accepting education in the UK and Europe.”
The coronavirus has forced a rethink in Australia around its reliance on Chinese students. Carracher says Chinese students take up 60% of PBSA beds in Australia.
Given the ongoing trade tensions with China, Tudge sees the strong reliance on China as “potentially fraught”, and has urged Australian universities to reach out to students in other countries.
Some, like CLV, have begun to look beyond China. Justine Cooper, head of sustainability and marketing, says: “We understand the importance of continuing to look at markets like India, Malaysia, Indonesia, Singapore and Hong Kong.”
The industry estimates that a part-recovery is at least 12 months away, and a full recovery probably up to three years away. If operators can survive, the consensus is that the sector will pick up. “While the damage will be material and sustained, we believe it will bounce back if Australia’s international borders open by 2022 – if we can survive until then,” Carracher says. “We have every reason to believe there is pent-up demand for face-to-face learning.”
Market report: Student housing
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