Value add tip: Student Housing – short and long term
Another sector related to demographics, but with implications less explored, is that of student accommodation. Australia is the fourth largest international student market in the world behind the UK, the USA and France. Not only does Australia have a very strong and well developed tertiary education sector servicing Australians but also the marketing of university places overseas is well-developed. However, the provision of accommodation for international students doesn’t match this and is grossly undersupplied.
Demand for tertiary education is growing globally and is a trend that is not expected to abate for decades to come. So the opportunities in this sector are both short term and long term. When the Australian dollar was at parity with the US dollar, international students would show a preference for universities in the United States but now a change in the exchange rate has essentially put a “36% off sale” tag on tertiary education in Australia. With Australian Universities consistently ranked highly in the world, demand has begun to skyrocket. The amount of student accommodation provided is currently estimated to be enough to cater for 10% of total demand. Melbourne is the third largest international student city in the world behind London and New York.
Opportunistic tip: Resorts and hospitality – short and long term
Currency movements and visitor volumes are also a theme for my final tip:tourism. Tourism property takes the form of resorts and hotels and can be found in locations right across Australia.
In the short term, with the currency not purchasing as much foreign currency as it used to, Australians are more likely to holiday at home. That trip to Hawaii, Las Vegas or New York or skiing in the Rockies is now 36% more expensive so revisiting an old favourite in Australia starts to look more appealing. The resorts of Queensland, northern New South Wales as well as the state capital cities have much to offer and ought to expect to see greater occupancy from locals.
The other compelling element of the exchange rate is that Australia just got 36% cheaper for overseas visitors. Whilst the tail end of the GFC is still having an impact on tourism numbers worldwide, Australia has gone from being an expensive place to visit to reasonably priced, even good value. We would expect to see more international visitor numbers in the near term too.
In the long term we would expect to see incredible numbers of Chinese visitors and this encourages us to recommend long term plays for Australian tourism assets. Starting in first-visit destinations like Sydney and Melbourne, we envisage Asia Pac visitors will later branch out into other pursuits on a second or third visit. This is where the forecasting risk increases as Chinese tourism is still in extreme infancy. A new-found penchant for sunshine and ocean pursuits might bode well for the Gold Coast, growth in snow pursuits would bode well for ski resorts while a search for wilderness and outdoor sports might make the right real estate in the Northern Territory look good value. The development of real estate to cater for these huge potential markets will require cutting edge intelligence on these target markets and a highly tuned responsiveness to this entirely new and fast-growing sector of Asian tourism.