Dubai's student housing market is a growth opportunity

Student housing is a relatively untapped market within the United Arab Emirates (UAE) in general and Dubai specifically, according to a new vision paper by real estate consultancy CBRE. Experts Gabriella De La Torre, Michelle Fraser and Rim Ghalayini outline why growth is expected over the coming years.

Student housing is a form of housing which typically combines private living areas (single or shared rooms) with common facilities and amenities. Students rent rooms within these developments to reside in while they complete their university degrees. 

On-Campus Accommodation
Housing that is located within or close to university premises and is managed, operated and owned by the university. 

University Affiliated Off-Campus Accommodation
Located close to university campuses within affordable residential communities, these are full residential buildings or single residential units that are leased by the university and then subleased to students. The buildings and/or units are managed and operated by the landlord/owner of the building. 

Purpose Built Student Accommodation (PBSA)
Developments Designed and built specifically for university students, these developments are operated by student housing management companies. Universities have no affiliation to these developments. 

Currently, most student housing in Dubai comprises off-campus residential buildings located in nearby affordable residential communities, such as Dubai Silicon Oasis, International City and Dubai Land. In addition, there are a number of non-affiliated off-campus student housing which are typically apartments, constituting the largest student housing product offering across Dubai. 

There is a limited supply of PBSA, with only three developments situated across Dubai, including Uninest which was acquired by Emirates NBD REIT in 2017, showcasing the potential attractiveness of this asset class among investors. However, PBSA developments are expected to increase in the future as demand for affordable student housing increases. Two such examples of new developments are The Myriad and KSK Homes Phase 2 in Dubai International Academic City (DIAC).

Supply and demand
By the end of 2019, existing supply for student housing in Dubai reached circa 5,200 beds across approximately 20 projects mostly located in DIAC, Dubai Land and Dubai Media City. Most of the future supply of student accommodation is expected to be located within DIAC, adding approximately 3,000 rooms to the market by the end of 2020. These developments are planned to be developed by a mix of international and local companies. 

During the 2018 - 2019 academic year, the total number of students enrolled within higher education reached circa 53,200. With the majority of the Dubai population comprising of expatriates, non-national students represented 66% of total enrolled students during the period, with UAE nationals constituting 34% of total enrolled students. 

Moving forward, it is anticipated that the student share split by region will shift in line with the wider macroeconomics trends. Moreover, PBSA developments are expected to remain an attractive investment, particularly if rental income is secured with an established operator. Furthermore, most of these buildings comply with the fundamentals of Sharia Law and are expected to benefit from potential growth in line with demographic trends. 

Drivers of demand
There are several demand drivers which may potentially impact the demand for student housing within Dubai over the medium to long term. 

Government vision
During 2017, the Ministry of Education (MoE) launched “The National Strategy of Higher Education 2030”, which aims to develop an innovative education system, enhance students’ skills and introduce creative academic programs. The strategy seeks to continually engage the private sector and develop curricula that will contribute to the UAE’s global competitiveness. 

The UAE government has also allocated AED10.2 billion to the education sector during 2019, constituting approximately 17% of the total federal budget for the year, to support, strengthen and improve the education sector in line with the Ministry’s Vision. 

Population
Dubai’s population reached 3.2 million as of the end of 2019 and is forecasted to grow at a CAGR rate of 3.0% between 2019 and 2024. In 2018, approximately 30% of Dubai's population was between the ages of 20 and 30 years old. 

The demand for education within Dubai is expected to continue to increase, sequentially impacting the student housing real estate sector, off the back of the steady increase in Dubai’s population coupled with its attractive higher education options within the region. 

Government initiatives
During 2018, the UAE government introduced a new visa reform for international students as well as resident students and their families. The reform has extended student visas from 1 year to 5 years and up to 10 years for “exceptional and outstanding” students who excel and record high scores within their academic career. Furthermore, students who live as dependents of their parents in the UAE can apply for a visa extension after graduation. 

The introduction of the new visa reforms is expected to increase the international student enrolment and induce the internationalisation of its education system within the short to medium term, which will in turn stimulate the demand for additional student housing within Dubai. 

Higher education expansion
The higher education sector in Dubai is currently undergoing a significant expansion, with a number of key universities, such as Herriott Watt University, Rocher Institute of Technology (RIT), University Wollongong (UOWD), University of Birmingham and Zayed Universities, expanding their campuses. Universities have seen an increasing demand for new courses and curriculum as well as enhanced research capabilities and infrastructure.

In conclusion

Supported by continual government initiatives to strengthen the education sector and position Dubai among the top education providers in the region, coupled with the increasing presence of international education providers, Dubai's student housing market is set to benefit and provide new investment opportunities.