Student housing investment is booming, thanks to an increasing number of international students moving abroad to study in English-speaking universities.
Following the lifting of border restrictions due to COVID-19, a surge of 6.4 million university students moved to a foreign country for education in 2020, according to research by Project Atlas. This is more than twice the number of international students in 2007.
The United States has emerged as the leading host destination with 15% of the international students globally – more than the United Kingdom (10%), Canada (9%), and Australia (6%).
Let’s take a closer look at why you should consider investing in student housing while market demand is robust.
Why Savvy Investors Choose Student Housing
With international student enrollment creating strong market demand for housing, not only in the US but also in other territories, Kathleen McCarthy of commercial real estate giant Blackstone recommends staking a claim on student housing investment.
In fact, Mike Tolj of Tolj Commercial Real Estate called this investment opportunity a “new gold mine.”
Here are four reasons why student housing investment is a resilient market.
1. It’s stable and predictable
Student housing has steady financial yields for real estate investors. Enrollment in post-secondary education provides landlords with a passive stream of tenants signing up for at least a full-year lease, which reduces the risk of unit vacancies.
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2. Enrollment is resistant to economic downturns
According to data from the National Multifamily Housing Council, enrollment in post-secondary education actually grew during the Great Recession of 2007-2009. From 2007 to 2008, enrollment grew 4.7%, and from 2007 to 2009, it increased 6.3%.
3. The value of student housing units will increase
Since 2004, public universities have seen out-of-state tuition and fees increase by 38%, adjusted for inflation. For students attending universities in their own state, tuition and fees have risen a staggering 56%. At private universities, these costs have increased 40%.
As costs of enrollment increase, so do the costs of student housing. In fact, data from 200 universities showed rent growth for student housing properties increased 7% quarter-on-quarter in Q1 of 2023, with the average cost per bed reaching an all-time high of $829 in March.
4. The diversity of tenants
The diverse financial backgrounds of tenants mean less cyclicality. Many students require a place they could prelease before coming to the university. According to one study, 69.7% of university bedrooms were preleased for the fall 2023 semester. This was a 7.8% increase over the Q1 of 2022.
In addition, driven by the increase in foreign student enrollments in US universities and the profitability of student housing rentals, foreign investors and sovereign wealth funds have started pouring in. This has resulted in the emergence of student housing investment as a specialized sector in the real estate industry.
Now Is the Time to Consider Student Housing Investment
As an investor, here are three strategies you can implement when considering student housing investment:
A final tip: while investing in student housing can lead to lucrative awards, there are risks associated with any investment. Conducting thorough research and using proper discernment helps manage and mitigate these risks.
