As the world’s demographic profile evolves, new opportunities are arising for property investors around the globe. Increasing numbers of students and graduates and an ageing population are both instrumental in generating growing demand for new market sectors.
The student housing market has come of age and is no longer classed as a specialist or alternative investment. Record levels of institutional activity are testament to its global potential as a mainstream real estate asset, totalling $13.5 billion in 2015.
In addition to mounting student numbers, graduates priced out of established housing markets also offer investment opportunities. This is particularly evident in Australia and the US, where suitable accommodation is failing to meet the demands of large student and graduate communities.
In Australia, the exchange rate has essentially created a '40 per cent off' sale compared to the US in the short term, while the consistent high ranking of Australian universities has seen world demand sky-rocket.
In the US, the millennials priced out of the housing market are boosting rental growth and creating investment opportunities in metro areas with a growing number of recent college graduates, such as Phoenix, Austin, Denver, Atlanta and Washington, DC.
Elsewhere, regional hubs of higher education are emerging as alternatives to established centres. Dubai is the number one destination for students from the Middle East, housing branch campuses for a number of Western institutions.
The provision of retirement housing offers similar potential. Figures from the UN forecast that more than 1.1 billion people will be above the age of 65 by 2035, making up 13 per cent of the population compared to 8 per cent in 2014. Evidence from Australia, Europe and Asia suggests there is substantial room for growth in the supply of older people’s housing.
Meanwhile, the UK's 65-plus population is set to rise by 1 million between 2015 and 2020, requiring an additional 11,000 new homes a year just to maintain the status quo. Australia faces a similar future, with the over-65 population forecast to grow from 3 million to 9 million over the next 30 years.
In China, the combination of rising incomes, an ageing population and a state system that cannot accommodate the needs of a burgeoning urban population are creating unprecedented demand against extremely constrained supply. Japan also has a well-reported ageing demographic, with an important impact on the logistics sector, for example, in the face of what should be significant future demand for the convenience of home delivery.
For students, graduates and over-65s, increasing the delivery of compact residential properties in urban locations will be fundamental to meeting demographic change. Beyond residential real estate, businesses could stand to benefit from relocating to secondary, more affordable markets with a high proportion of young professionals, or investing in the industries that will play a major role in supporting our increasingly elderly population.