The Australian Education Fund is expanding, while other groups including UniLodge and private developers are snapping up any potential sites.

In January this year a joint venture between Singaporean sovereign wealth fund GIC and Macquarie Capital bought a majority interest in student accommodation group Iglu. Although the actual investment figure has not been released it is widely regarded as the largest single transaction in Australia's student accommodation sector.

The University of Western Sydney will also develop a multi-storey home, estimated to cost more than $120 million, in the "civic heart" of Parramatta.

Structural undersupply, increasing occupier demand and the growing level of global equity chasing new investment opportunities is having a positive impact on Australian student accommodation markets, according to Knight Frank agents.

As the market develops, in terms of both knowledge and stock, transactional activity will follow. Urbanest continues to develop their Australian portfolio, while capital recently injected into Iglu from GIC, will be committed to building additional properties. The depreciation of the Australian dollar may also provide an additional incentive for foreign investment in  the sector.

James Parry, head of institutional sales in Australia says the net initial yields for high quality, well located, purpose-built student accommodation (PBSA) Sydney assets are likely to range from 7 per cent to 7.75 per cent.

"However, given high occupancy rates, asset rarity, limited new supply and strengthening global investor demand for high quality PBSA there is scope for yields to tighten over the next few years as the market matures and stabilises," Mr Parry said.

"There is a wall of money chasing traditional asset class investments in Sydney, with a large number of parties being disappointed. We believe there is potential for this global money to invest in the student accommodation."

Emily Fell, from Knight Frank's student accommodation team, said the growth of student accommodation as a global asset class has been underpinned by characteristics of structural undersupply, positive rental growth and stabilised returns.

"This increasingly mainstream investment category is gaining recognition from both institutional and global investors, as demand increases from the rise in global student mobility," Ms Fell said.

Paul Savitz, Knight Frank's associate director of consulting, said global investor interest in the sector is beginning to emerge as latest data shows the number of full-time students enrolled at Sydney universities has increased by 48 per cent since 2001, to a total of 161,742.

"In total there are 41,375 full-time international students studying across the five main Sydney universities, an increase of 77 per cent compared with 2001. A depreciation of the Australian dollar,  increasing confidence in student safety, and the simplification of student visa applications will facilitate future growth."