lyf Bondi Junction Sydney (pictured) is one of the co-living properties acquired by CapitaLand Investment's lodging private fund. (Image: Google Maps)
In Australia's housing sector, fund managers are seeing an opportunity to support rental growth across student accommodation, build-to-rent, and healthcare real estate.
This comes amid record migration, chronic undersupply and an ageing population.
The living sectors in Australia are "fertile ground" for institutional investors to deploy capital and expand access to well-managed housing at scale, according to a recent report by the Asia Pacific Real Assets Association (APREA).
In Sydney and Melbourne, migration-driven growth and high barriers to home ownership are increasing demand for rental housing and extending rental tenures, said Rodney Fung, managing director of real estate for Asia Pacific (Apac) at Canadian pension fund manager La Caisse.
Read also: Australia property sector enters a new compliance era as rules tighten for agents, developers
He added that the persistent supply gap is creating affordability pressures, which underlines the need to scale housing delivery responsibly so that rental markets can remain stable and sustainable over time.
"For long-term institutional investors like La Caisse, the dynamics reinforce the importance of scalable, institutionally delivered residential supply that offers a predictable income while aligning with the long-term health of the housing system and with the potential to keep pace with inflation," Fung said.
The co-living segment — with its flexible and fully serviced housing in supply-constrained urban locations — is emerging as a compelling solution for mobile professionals or residents seeking affordable housing options.
However, a clear mismatch remains between capital appetite and the delivery of institutional-grade products, said Rahul Bharara, CapitaLand Investment Australia’s chief investment officer and CapitaLand Investment’s global head of lodging and living, private funds.
"Asset conversions and well-structured partnerships focused on development are likely to deliver predictable, risk-adjusted returns [in co-living]," Bharara noted.
Opened in 2025, lyf Bondi Junction Sydney reflects growing demand for flexible living among mobile professionals and international travellers. (Image: Google Maps)
As for healthcare real estate in Australia, structural tailwinds include the country's ageing population, which is set to drive care and supply services.
Read also: Australia housing affordability set to worsen for new homebuyers in 2026: Moody's
That could create long-term demand for hospitals, medical centres and aged care accommodation, according to Australian Unity, which offers private health insurance, aged care services and retirement communities.
With the demographic curve "locked in", so is the demand for care settings across inpatient, outpatient and residential care environments, said Viji Yogavaran, fund manager at Australian Unity.
As care shifts towards day procedures, integrated peri-operative hubs and distributed rehabilitation, it is opening new opportunities. Purpose-built day hospitals, diagnostics and short-stay centres are becoming increasingly important, in Yogavaran's view.
The growing momentum in Australia's living sectors is sustainable over the long term, said Josh Rose-Nokes, director of living research for Apac at Cushman & Wakefield.
In particular, Sydney faces the most acute imbalances in student housing as the city experiences the deepest unmet rental need and, accordingly, the most stretched affordability. This leads to an increasingly diverse range of rental housing models, including rapid growth in co-living arrangements, Rose-Nokes added.
For more news and analysis, read our weekly e-paper. Prefer a print copy? Get it delivered to your home every Monday.
Read also: M&G Real Estate makes foray into Australian senior living sector