Sydney is in danger of falling dramatically behind its competitors in the international student market if it does not address major problems with student housing, a new study has revealed.
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There is currently less than one purpose-built bed for every 10 students, according to research released by commercial property firm Jones Lang LaSalle.
The lack of affordable housing has driven up costs in the private rental market and forced students to live in squalid conditions in city terraces.
The conditions are putting the image of Australia's third biggest export – a $16 billion industry – at risk.
"There is a massive undersupply," said JLL's national director of student accommodation services Conal Newland, who was speaking at the international student accommodation symposium at the University of Sydney on Friday.
"Australian universities' international recruitment potential is subject to the performance of a housing sector over which they have little control."
In June, an investigation by the City of Sydney revealed up to 58 people were living in a three-bedroom townhouse in Ultimo, with 38 other similar properties under the microscope. In one case, a group of 10 was crammed into one bedroom, while others slept in bathrooms and a pantry.
The symposium heard that while international students enjoyed the academic elements of university life in Australia, they only reported 49 per cent satisfaction when it came to affordability, according to research by Professor Terry Burke at the Swinburne University of Technology.
Compounding the problem is that international students earn significantly less than the average $20,000 local students earn a year, figures from peak body Universities Australia reveal.
But economists are at a loss as to how to cater to the demand from the lower-end international students without a huge injection into the market. The 4954 beds that are about to become available will barely make a dent.
"The issue is, can anyone actually build any product that matches those rates of $100-$150 a week for a bed?" asked Urbis economist Clinton Ostwald.
"The question for Sydney is, what roles do universities and government have to play in terms of pastoral care?"
While authorities grapple with the lack of affordable student housing, "semi-affordable" housing for the higher end of the market is springing up in central Sydney.
For $340 a week, students can get a 13-square-metre room in an apartment shared with six others in the brand new Steps at Central Park that towers over the townhouses of Ultimo.
It's complete with washing machines that you pay for with your smartphone, a full-scale auditorium, smart TVs that carry everything from China's Xinhua news channel to Star India and a "flexi-study" space on every second floor.
It's a multi-million-dollar, 770-bed development that is aggressively targeting the high end international student market.
"There will be no 10 bunk beds to a room in here," said UniLodge's general manager, Phil Shelley. "It's all smart-card operated, so its strictly one person per room – even couples aren't allowed."
"For the parents who are often investing in this accommodation for their kids it's all about security."