Investing in student housing spikes

SHORTAGE: As the student population increases, demand also rises for student housing which so far is experiencing a critical shortage in Malaysia

"You can’t go wrong with students,” an industry observer said recently. Judging from the increasing number of condominiums, serviced apartments and SOHOs built near universities and colleges, that would seem to ring true. Money always flows towards the most profitable areas and of late, student rentals seem to offer a very consistent income amidst economic
uncertainties.

“Student accommodation is getting very popular in these unstable times as they provide consistent returns. The student population everywhere is on the increase, as such, more accommodation is needed every year. In the UK, the US and even in Shanghai and Singapore, and university towns in many parts of the world, developers are realising the demand and are building smaller units of condominium and apartments such as

SOHOs to cater to these students. As an investment class, they are quite unbeatable in terms of returns,” shares Gavin Tee, President and Founder of Swhengtee International Real Estate Investors Club.

Sales director of Qudoss, Jonathan Thompson, agrees, adding that student accommodation is recession-proof. “During recession, people take student grants to get back to school. Usually, rental is paid six months in advance so the rental is guaranteed. ” Qudoss is one of UK’s property marketing agents that has set up an office in Kuala Lumpur.

Recent data from the Ministry of Higher Education (MOHE) showed that the international student population in Malaysia has risen to over 90,000 or about two per cent of the total international student population worldwide, making us number 11 in the world in terms of total international student population. More notably,MOHEintends to raise that to 200,000 by 2020 citing an estimated RM600 billion worth of contribution from these
students to our economy.

Part of that RM600 billion pie will obviously go towards accommodation.

This huge influx of students would require housing that is affordable yet comfortable. Anecdotal evidence has shown that the educational institutions in Malaysia simply can’t cope with housing the present student population within their campuses or even outside hostels/apartments rented from private owners.

“There is a private university that can only accommodate 400 students within its campus. The students are charged RM1,100 per room. But if two students share a room, each is charged RM500. This is to encourage them to share as there is a dire shortage of student housing in the area,” reveals an industry source.

According to MOHE, the top five countries which most of the students come from are Iran, Indonesia, China, Nigeria and Yemen. Most of the parents of these students do not buy properties to house their children here, says Ho Hon Sang, Managing Director, Property Development Division (Malaysia) of Sunway Berhad.

Most buyers are locals: “Most of our buyers are locals who buy to rent out to students. The number of parents of foreign students buying properties to house their children here is negligible,” he told NST RED in an e-mail interview. He adds that most of these properties are partially furnished condominiums such as Sunway Monash Residence which cater to both local and foreign students studying at Sunway University, Monash University and Taylor‘s lake side campus.

An average unit of about 1,500 sq ft to 1,600 sq ft is priced at between RM700,000 and RM800,000 and can fetch average rental of between RM4,000 and RM5,000 per month giving an average annual rental yield of 7-8 per cent.

According to Ho, the best thing about renting out to students is that the rental yield is good and consistent which proves to be a very good recurring income. On the flipside, the students may be a bit too much to handle with a tendency to damage things and create a noise hazard.

There are about 7,000 international students attending Sunway’s universities and colleges and the number is growing, as a result of which, Sunway University is building a new 12-storey tower block to meet the growing demands.

Of course, the bulk of the students in both private and public educational centres are locals as is true of everywhere else in the world. Apart from Sunway, the other locations popular with education centres are Cyberjaya, Bangi, Nilai and the up-and-coming Iskandar EduCity.

Cyberjaya stands out as it has reached ‘maturity’ point after 15 years, according to Danny Goh Meng Keong, executive director for MCT Group of Companies. “About 20 developers have bought land there, so for the next five to 10 years, Cyberjaya will be very happening.”

With three large higher learning institutions there such as Limkokwing University, Multimedia University (MMU), and Cyberjaya University College of Medical Science (CUCMS), the demand for student housing keeps increasing every year, prompting more new entrants into the market.

One of them is Seri Mutiara Development Sdn Bhd which is collaborating with CUCMS to build MutiaraVille@Cyberjaya, a freehold apartment that comes with guaranteed rentals for up to 25 years at returns ranging between seven and 11 per cent. Built on 19.27 acres near CUCMS, the maiden project of Seri Mutiara will have an estimated gross development value of RM1 billion.

Another area that has caught the eye of a leading developer is Bandar Baru Bangi which up till now has seen sluggish housing demand despite a proliferation of institutes of higher learning
in the area. The institutes include UKM (University Kebangsaan Malaysia), UNITEN (University Tenaga Malaysia), UniKL (University Kuala Lumpur), UPM (University Putra Malaysia) and KYPM (Kolej Yayasan Politeknik Mara).

In the pipeline 5kms away is Southville City, a RM2.15 billion township that has a 70 per cent residential component priced below RM1 million to cater to the affordable segment including student housing. The developer, Mah Sing Group Berhad, plans to open it for registration in 3Q 2012.

Even more exciting is the 350-acre campus at Educity Iskandar which will be shared by no fewer than eight international universities. Newcastle, Southampton and Reading universities will share the international student village with the Netherlands Maritime Institute of Technology and Raffles University.

Australia‘s Monash and a cinematic art school associated with Pinewood Studios may come in as well. It is envisaged that students from all of the universities will live together in one giant international student village and will share sports and leisure facilities including a 14,000-seater stadium and an Olympic-length swimming pool.

It is foreseeable that the presence of so many international students and expatriate lecturers will have a multiplier effect on the economy as envisaged by the MOHE. Word is already out that not only Singaporeans but expatriates in

Singapore such as the British and Americans have already started buying up properties near these educational institutions,“ says Ho Chin Soon, director
of Ho Chin Soon Research.

Role of international schools: Not forgetting too are the role of international schools in the overall scheme of things. As pointed out by Ho of HCS Research, “International schools are one of the key requirements to attract foreigners.

When they come here for work or study and bring their families, they would definitely want to know if there are international standard schools and higher institutions in Malaysia. In this regard, we did pretty well, for example, there are several international schools clustered in enclaves popular with foreigners such as Mont‘ Kiara, Setia Eco Park, Desa Park City and Embassy Row in Jalan Ampang.

“Local developers realise this which is why international schools have always been a key feature in many of the upper scale developments here,” says Ho.

Will this herald a new trend in Malaysia which can help drive the local property market? In the UK, the trend has caught on with many international property consultancies such as Knight Frank devoting huge amounts of research on it.

Certainly, if the student population here reaches a critical mass, the multiplier effect which includes demand for student housing will also reach a new level requiring a lot more accommodation targeted at students.

 

Gavin ... as an investment class, they are quite unbeatable in terms of returns.

Ho... parents of foreign students buying property here is negligible.

HCS... international schools are one of the key requirements to attract foreigners.

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