Student Numbers Are Dropping What Does This Means For Dunedin Landlords

Posted on Thursday, August 1 2013

Dunedin University Investment Property – In The Short Term

In recent times it has been well documented that the number of full time students enrolled at Otago University dropped by 1.8% last year and it is predicted that they will drop by a further 1.8% at the end of this year. If these predictions are right then there will be roughly 700 less full-time students than in 2010. It would be naïve to think that there won’t be a number of empty student flats on campus next year. A few landlords will be lucky, some will be unlucky but the landlords who do the relevant market research will ultimately come out on top.
Last year the number of full-time domestic students actually dropped by nearly 2.5% to 17,680 while the number of full-time international students increased.

Many people (including myself) thought that Otago University would benefit from the Christchurch earthquake as it was predicted that many students would choose to avoid Christchurch. This wasn’t the case. It seems that with fees still increasing during this time of economic downturn, people have decided to avoid studying altogether as a reduction in student numbers is a common theme across the country.

Full-time international student numbers were at 2050 in 2007 and dropped to 1426 in 2009. When the global recession took effect the New Zealand dollar became relatively strong and thus Otago University lost their competitive advantage as they could no longer market themselves as a cheap place to study. They have since been working on new strategies to attract international students and that number has been gradually increasing ever since. Last year there was an 8.7% increase after a 7.3% increase the year prior.
While there was a drop in the number of full-time international students after the market crash, the total number has been consistent.

Between 2007 and 2011 the number has increased from 2546 to 2798, with over 20% coming from the U.S. – Mostly on exchange programs.
There are currently over 100 flats (not including studio rooms) in the Campus area still not yet let for 2013.

Dunedin Property Investment

There was never any real ‘rush’ for flats in August and September like we’ve experienced in previous years so on the surface it may look like things are in dire straits. If you’re a landlord and your 5+ bedroom flat isn’t rented then you have every reason to be nervous. However, based on the projections it looks as though the University is going to have numbers very similar to that of 2009 and there have only been a handful of new developments since 2009 – The majority of which were studios.

The numbers in 2009 were still higher than 2007 and 2008 so with such a high number of flats still not let for 2013, it would be fair to assume that many students are aware that they aren’t likely to miss out on a prime campus flat next year and are therefore a little more relaxed about signing up for one. Some will also be waiting until February as saving that 6 weeks rent is more important now than it has been in years gone by.
With demand and supply a little closer together and taking into account that money is reasonably tight, we’re likely to see rents at the top end plateau and perhaps decrease slightly over the next couple of years. There is already evidence to suggest that cheaper flats around $100 a room per week, even if they a slightly run down, are more sought after. The demand for high quality flats on campus will always be there but one may not be able to expect $150 a room for their flat just because the flat next door is advertised at $140 and they think theirs is better.
For some time now, landlords have been able to take advantage of a relative lack of supply of prime campus flats. With the playing field a little more even (for now), landlords won’t be able to just increase their rents every year and expect a group will take it. There are still opportunities for substantial capital gains but you need to be a little more astute and learn the market to minimize the risk and potentially give yourself a competitive advantage.
For instance, the international/ foundations studies hub moved from the North West side of Campus down to the Stadium so there is a demand for studio rooms and high quality furnished 2,3,4 bedroom flats close to the stadium – NOT IN RAVENSBOURNE. We also know that over 20% of international students come from the U.S and many of these are here for only a semester.

Why not look into the possibility of making an arrangement with a college exchange program where you provide luxury accommodation for their students and they pay you a premium rate? Food for thought anyway….

By Matt Cutler Dunedin University Investment Specialist.

Dunedin Property Investment Cutlers


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Expert's Bio

Matt Cutler

In 2005 while studying law, economics and history at Otago University, Matt started working part time as an assistant property manager. In 2006 a full-time roll opened up and he has been managing student properties ever since. In late 2011 Matt started selling University Investment properties and achieved record sales within the first 12 months. He has now developed a position as a respected advisor in the industry.

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