Student numbers are booming and along with them, demand for accommodation. But before landlords hitch their wagons to the student accommodation train, it’s wise to review the insurance situation.
Globally there has been a surge in the number of people seeking out higher education and Australia is no different. According to Knight Frank’s Global Student Property 2019 report, student numbers in Australia have increased 50 per cent in the past 10 years.
The Australian Government is aiming for 40 per cent of 25 to 34 year-olds to hold a degree by 2025 (up from 27 per cent currently), and in 2012 removed the student numbers cap and bolstered funding to improve the participation rate of students from low socio-economic groups. In 2018, almost one million Australians were in higher education, according to the Department of Education.
In tandem, tertiary institutions across the country are making significant gains in attracting overseas students. The number of people applying for a higher education visa from outside Australia increased by 118 per cent between 2010-11 and 2016-17. Today, there are 370,000 full-time international students studying in Australia (up from 268,000 in 2012), representing 32.4 per cent of the full-time undergraduate population.
This push for more domestic and international students is being backed by state-based increases in university funding (up 58 per cent since 2009).
What this means is there is a growing need for student accommodation, especially close to tertiary institutions in capital cities. And although there has been a flurry of building activity developing purpose-built student accommodation (some 25,000 rooms and dorms have been built in the past four years, and institutional investors are eyeing up build-to-rent proposals), currently the number of beds accommodates just six per cent of enrolled students (according to AHURI’s Private Rental in Transition report). The result is that many students rely on the private rental market for accommodation.
The student market can be lucrative, as there is:
- high demand.
- limited competition (the property must cater for the needs of students, usually meaning furnished with great internet access, close to public transport and walking distance to shops).
- relatively high but steady turnover of students meaning no need for long leases and flexibility (opportunities may also exist to use the property for short-term accommodation during holiday periods and between terms when students return home).
- opportunity for long-term capital growth (especially around some new campuses being developed in rural and outback locations).
- high yields due to the number of students in the property (estimated at between six and eight per cent for inner-city properties close to institutions by the Student Accommodation Industry Association).
- good returns (according to universities, rents for shared and full property can range between $80 and $500 per week, while SAIS says that the greatest occupancy is predominately in the $170 to $225 per week per room range).
But there are also some pitfalls… Landlords and agents operating in this market need to be aware of the rules and regulations around student accommodation, including whether they are operating a share house or a boarding/lodging/rooming house. The distinction is important, as tenants and lodgers have different rights* and can be governed through different state/territory legislation.
The landlord insurance question
The way the property is rented also has implications for insurance cover. At EBM RentCover we aim to deliver certainty by being open, honest and transparent. We believe it is imperative for landlords and agents to know if and when insurance cover is available, and also when cover is not possible.
Landlord insurance policies are typically paid for on a per tenancy basis.
Scenario 1: One property, one lease = one landlord insurance policy
If the landlord choses to rent the property as one rental with multiple students named on the one lease (meaning all tenants are responsible for paying rent and other obligations under the tenancy agreement), a landlord insurance policy like EBM RentCover Ultra or Platinum may be suitable.
Scenario 2: One property, multiples leases = multiple landlord insurance policies
However, if the landlord decides to rent out each bedroom in their property (students share common areas) with separate leases, multiple insurance policies would be required. This letting scenario is one that few landlord insurers are willing to cover. The simple reality is that these arrangements pose significant risks, with rent default and damage regular occurrences.
Where there are multiple leases on one property, when it comes to damage, it is difficult to identify the party liable and when it comes to common property, responsibility is even harder to determine.
At EBM RentCover, we do not offer cover for boarding houses or where there are multiple leases on the one investment property. Landlords looking at this kind of leasing should engage an insurance broker (like our colleagues at EBM) to secure this specialist cover. HEADS UP: Agents acting for owners of student accommodation could be held vicariously liable for claims if the correct insurance cover is not in place.
Not sure which insurance solution is suitable? If you need us, we are there. Contact our Expert Care team on 1800 661 662 if you have any questions about cover.
*Tenants pay rent and have control over a premises (set out in a Residential Tenancies Act lease) and, usually, control of the whole premises (although a residential tenancy lease can be for part of a premises). Boarders/lodgers pay a fee for accommodation (tenancy may be by way of a tenancy agreement under the Residential Tenancies Act, or an occupancy agreement), and although they may have access to parts of the house other than their room, boarders do not usually have control over the premises.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.
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