Student housing presents a unique and profitable investment opportunity, especially in Dunedin, home to the University of Otago, New Zealand's oldest university. In 2024, Dunedin’s student property market is not just promising but a strategic venture worth serious consideration.
The common perception of student housing being high-risk and prone to damage is largely outdated. While there are always exceptions, most students are reliable tenants who pay rent on time and keep occupancy rates high.
With favorable market conditions returning, Dunedin offers a golden opportunity for investors to enter or re-enter the student property market.
The University of Otago: A Pillar of Stability
The University of Otago, established in 1869, is central to Dunedin’s identity and economy. With over 21,000 students and an additional 8,000 from the nearby polytechnic, there is a consistent demand for housing, especially near the university campus. Otago's international reputation for academic excellence attracts a steady influx of students, further stabilizing the housing market.
In recent years, the university has expanded its residential accommodations, adding a brand new 450-bed Hall of Residence and extending another existing hall by 70 beds. This is to capture the forecast growth in student numbers, as the secondary school bubble of students flows into the tertiary sector in the coming years. This will increase demand for private rentals in the years following, making student accommodation a highly attractive investment.
Consistent Student Demand
Demand for student housing in Dunedin is consistently high, driven by the city’s small size and the university’s significant economic influence. First-year students typically live in residential colleges, but from their second year, most move into private rentals, preferring larger flats close to the university. Castle Street, in particular, is highly sought after for its proximity and vibrant student life.
As students advance in their studies, they tend to move outward into smaller flats, often near the medical precinct or city centre, where they can still enjoy Dunedin’s nightlife. This consistent demand creates a reliable rental market, even during economic downturns, as education remains a priority.
Rental yields in Dunedin’s student property market are also attractive, ranging from 6% to 8% gross. Properties close to campus command higher rents, and with multiple students sharing a single flat, landlords enjoy higher returns. Compared to larger cities like Auckland or Wellington, Dunedin offers a lower entry cost with strong potential for stable, long-term returns.
Why 2024 is the Ideal Time to Invest
Several factors make 2024 an opportune time to invest. The student market, which had slowed in 2022, is recovering fast. The first half of 2024 saw the same volume of sales as all of 2023, and the third quarter of this year is double that again.
Changes in regulations, such as the full reinstatement of interest deductibility by 2025 and the reduction of the Brightline test to two years, have boosted investor confidence. Mortgage interest rates have peaked and are beginning to fall, while access to financing is improving. Additionally, expected reforms to tenancy laws in 2025 will further ease the burden on property investors.
Conclusion: A Strategic Investment
Investing in Dunedin’s student property market in 2024 offers stability, growth potential, and strong returns. With consistent demand from students, the University of Otago’s influence, and improving market conditions, Dunedin presents a compelling case for both seasoned and new investors. Now is the time to capitalize on this promising market.
The statements made within this article are in the opinion of the individual writer only and do not constitute legal or specialist financial advice. Please seek independent legal and financial advice when dealing with all property transactions.
Matt Morton is a specialist residential investment broker (since 2011).
VIDEO: Click on the photo above for an in depth look into Dunedin’s famous Castle Street.