By Joseph Wong

With the pandemic now behind us, Malaysia is rapidly becoming a premier choice for international students seeking higher education. This growing influx of students is set to transform the real estate industry, fueling demand for rental properties and student accommodations. 

In fact, trends in the size of the global student population and in the number of those students who travel to Malaysia to study will make the country an international studies powerhouse by 2035, according to data released by real estate giant IQI, a member of Juwai IQI. 

“Now that the pandemic is past, students from both secondary and tertiary institutions are increasingly choosing Malaysia. For example, in a typical year, data suggests that Malaysia hosts about 125,000 international students. About 70% of these students are in private higher education institutions. The others study in public universities and secondary schools,” said Juwai IQI co-founder and group chief executive officer Kashif Ansari. 

Currently, out of all the tertiary students in Malaysia, nearly 6% of international students are from overseas, according to the Ministry of Education. International students are even more valuable to the Malaysian economy than tourists. When Malaysia hits its target of 250,000 international students per year, that will mean an extra RM16 billion for the economy, every year, according to the Education Ministry. 

“Remember, the Rapid Transit System Link between Singapore and Malaysia is costing about RM10 billion to build. So international students will soon inject more into the economy every year than it cost to construct that major infrastructure project. 

“Each international student spends an estimated RM46,000 per annum, or RM88,000 per annum if a family member accompanies them. Besides the increase in economic activity, international students also create cultural exchanges and build cross-border ties between countries. These relationships enrich us both emotionally and financially,” said Ansari.

Impact on rental market

International students in Malaysia significantly influence the residential market, particularly in the rental sector around universities and educational hubs. They drive demand for rental properties in cities with major educational institutions, especially Kuala Lumpur, Penang and Johor Bahru. This consistent demand provides landlords with stable rental income, making investment properties near educational institutions more attractive. However, landlords may face a dip in demand during the off-season when classes are not in session.

This trend benefits the 77% of Malaysians who own their homes and those with investment properties. Students also stimulate the construction of new housing by creating demand for completed units, whether they rent directly or through investors.

Students typically do not compete with local renters because the market has adapted to meet their needs. Developers are building smaller, more affordable residential units such as studio and one-bedroom apartments suited to students living without families. Budget-friendly student accommodations often include bedrooms with bunk beds, shared baths and common facilities.

Moreover, more universities and private developers are constructing purpose-built student accommodations for international students. These facilities cater specifically to students, offering amenities like furnished rooms, Wi-Fi, study areas, common areas and security features. For instance, a well-known university in Sarawak offers standard twin rooms at its Student Village for RM540 per month and air-conditioned single rooms for RM1,250 per month.

Booming student numbers

The number of students pursuing tertiary education abroad has nearly tripled over the past two decades, according to UNESCO. China leads as the world’s top source of international students but other countries with large populations, increasing wealth and a growing appetite for overseas studies are also contributing significantly.

If current trends continue, by 2040, an estimated 12 million tertiary students per year will travel abroad for education, almost doubling the current 6.3 million. This surge is driven by the unprecedented increase in the number of young people. Currently, international students constitute about 3% of all tertiary students.

By 2050, the world will have 665 million young people aged 20 to 24, with about 400 million engaged in tertiary education, up from 236 million in 2020. This data comes from the International Student Mobility at a Glance, Global Analysis report by TIME.

Malaysia stands to reap significant benefits from this trend. Much of the growth in international student numbers will occur in countries that already send large cohorts to Malaysia, positioning the country to capitalise on this expanding market.

Where Malaysia ranks

“Malaysia is working to reach a long-term goal to build its foreign enrolment base to 250,000 students by 2025. While on a different scale than larger countries such as the USA, Malaysia has ranked near the top among education destinations for at least a decade. 

“As far back as 2015, Malaysia was already ranked eighth in the world for incoming students. Today, the top five source markets for international students in Malaysia are China, Indonesia, Bangladesh, India and Nigeria,” said Ansari.

Spotlight is on China 

While China’s student numbers are no longer growing in absolute terms, Malaysia has the potential to capture a larger market share of Chinese students. Increasingly, Chinese students are opting to study within Asia for their overseas education. Malaysia competes with Singapore, Hong Kong, Japan  and Thailand for these students, all of whom seek the economic and soft power benefits associated with hosting them.

Malaysia holds several advantages in this competition: Its lower cost of living compared to Japan and Singapore, a larger population of Chinese speakers than Japan and a relatively safer environment compared to Thailand, said Ansari.

Some Chinese families view Malaysia as a closer, safer, more welcoming, and more affordable alternative to the United States or United Kingdom. Between 2021 and 2023, the share of Chinese tertiary students intending to study in the United States decreased by one percentage point, while the UK saw a two percentage point decline, according to a 2023 report from New Oriental Vision Overseas Consulting Company. Meanwhile, the share of students intending to study in Asian destinations increased, indicating a shift in preference towards the region.

“Not all of these students are tertiary students. In fact, 27% of Chinese students who intend to go overseas to study are secondary students. For secondary students, Malaysian international high schools offer a quality education at an affordable price. Tuition at a typical international school in Malaysia is just 30% of the cost of a similar school in mainland China. Sending a child to study in the United States requires three times more gross annual income than Malaysia, according to our estimate,” he said.

Universities: Catalysts for real estate development

Universities are more than just educational institutions as they are also powerful engines of real estate development. As hubs of intellectual activity, cultural exchange and economic growth, universities have a profound impact on the surrounding real estate market. This symbiotic relationship between academia and property development transforms campuses into thriving communities and attractive investment opportunities.

The influx of students, faculty and staff creates a consistent demand for housing, driving the development of various residential options. From student dormitories to faculty housing and off-campus apartments, the need for accommodation fuels the construction of new properties. In many university towns, this demand extends to amenities such as grocery stores, restaurants and recreational facilities, further boosting local real estate markets.

International students, in particular, play a crucial role in this dynamic. As universities attract students from around the globe, the demand for high-quality, conveniently located housing increases. This trend not only stabilises rental incomes for property owners but also encourages the development of purpose-built student accommodations. These modern facilities offer amenities like furnished rooms, high-speed internet, study areas and security features, catering specifically to the needs of the student population.

Moreover, universities often collaborate with private developers to create mixed-use developments that blend academic facilities with commercial and residential spaces. These projects enhance the campus experience and integrate the university more deeply into the urban fabric. For instance, retail stores, cafes and entertainment venues within or near university grounds create vibrant, multi-use environments that attract both students and residents.

The economic impact of universities extends beyond direct real estate development. As centres of research and innovation, universities foster start-ups and attract businesses seeking proximity to academic expertise and talent. This, in turn, stimulates commercial real estate markets, with increased demand for office spaces, laboratories and co-working environments.

In Malaysia, the rising number of international students choosing to study in the country underscores the significant role universities play in shaping the real estate landscape. Cities like Kuala Lumpur, Penang and Johor Bahru are witnessing a surge in property developments tailored to accommodate the growing student population. The trend towards higher education within Asia further amplifies this effect, positioning Malaysia as a key player in the global education market and a hotspot for real estate investment.

By attracting diverse populations and fostering economic activity, universities transform their locales into dynamic, prosperous communities. For investors and developers, recognising the intrinsic link between universities and real estate can unlock numerous opportunities for growth and development.