Purpose-built accommodations are a growing form of investment in the country. Statistics show that international student growth rate is at 5% per annum, 4th overall in export commodity. With this numbers in mind, is this a good form of investment?
A recent survey from Jones Lang LaSalle shows that Australia is lagging behind in student accommodation, compared to similar popular destinations such as the United Kingdom and the United States.
The numbers are favorable, but lending issues may arise. Most lenders will only lend up to 80% of the property value, where some borrowers need to pay outright and borrow against their own. Lenders will look at the property’s ability to sell if the loan goes bad, and most lenders are yet to be convinced of the potential of purpose-built accommodations.
Investors should be aware that these are long term operational businesses. In a recent deal closed by Jones Lang LaSalle, the net yield of the accommodation was between 2.75-8%, a better result compared to residential investments. But the question remains whether the returns outweigh the risks.
Read more about this on the Property Observer website.