In an all too familiar sign of the times Ireland’s student accommodation market has come under increasing pressure in recent years thanks to a combination of rapidly growing demand and largely static supply.
The latest data from the Higher Education Authority shows that total full-time student numbers grew again to over 200,000 in the 2023/24 academic year. This marked the continuation of a steady trend with full time student numbers growing by over 20,000 in the past five years thanks to increased numbers of Irish domiciled and, particularly international students, which have increased by 36 per cent over that period.
In Cushman & Wakefield’s latest review of the student market we forecast that these trends are very likely to continue. Our forecasts indicate that full time student numbers are likely to rise by over 30,000 nationally over the next decade, helped by increased numbers of younger Irish people across the country.
We estimate that this rise in full time student numbers alone will translate into an increase in student demand of almost 17,000 beds over the next decade – most of which will be concentrated in the Dublin, Cork, Galway and Limerick markets. However, in reality significantly higher bed numbers than this will be required over this time horizon in order to also alleviate existing supply/demand imbalances which have spilled over into the private rented sector. To quantify this supply/demand imbalance by 2034/35 we estimate that total national demand pool for student accommodation could reach over 115,000 beds compared to current supply of only approximately 47,000.
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Unfortunately overall supply across the purpose-built student accommodation segment changed little over the past year, in contrast with the continued growth in demand. We estimate that the overall stock of public and private beds only grew by approximately 1,300 beds over the past year while only another 1,300 beds again are currently under construction.
Across the planning system the picture is a little more promising – planning permission has been granted for approximately 11,100 beds, the majority of which are targeted for the Dublin, Cork, Galway and Limerick markets. However permission for many of these beds was granted pre-2021, and given the large rise in construction and funding costs since then question marks linger around whether all these beds can be delivered over the medium term.
In our view the large and growing gap between demand and supply for student accommodation means that the path of least resistance for student rents appears higher over the medium term. The ultimate solution to this problem is more supply and investment in the sector. Thankfully we saw a big uplift in investment in the segment last year, with deals for Scape Dublin and Point Campus culminating in total investment of about €230 million in 2024. Investor interest in the student accommodation segment is also strong at present, and looking ahead it is critical that Ireland capitalises on this.
On the financing side of things gradually lower interest rates should help scheme viability, but Ireland also needs to avail of more low-cost finance initiatives such as 2023′s collaboration between the European Investment Bank and the Housing Finance Agency to help deliver higher student bed numbers.
Construction cost inflation rates are likely to ease over the medium term, but unfortunately price levels remain elevated compared to pre-2021 levels so supports in the form of subsidies and/or VAT reductions should be considered to spark further development in the segment.
Finally, in our view Ireland’s approach to rent caps (which also applies to the student accommodation segment) warrants a rethink if we are to harvest the investment needed to reduce the growing supply/demand imbalance in the market.
Tom McCabe is head of research and insights at Cushman and Wakefield Ireland.
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