Student housing in the UK continues to perform
The UK remains at the forefront of a global boom in student housing
There has been a boom student housing in the UK, with 2017 being the biggest year in the growth of student accommodation, an international real estate service provider has said. Savills said that the previous year saw the second largest amount invested in student housing. The rise in demand for student housing in the UK is part of a global growth seen in student housing over the past few years, with the UK being the leader in the sector.
Founder at property crowdfunding website UOWN, Haaris Ahmed said that there has been strong market demand for student property regardless of the stage of the economic cycle and this provides a good backdrop for investment. He further said that people are always looking to upskill, especially when the economy is weak, and this feeds into constant demand. Ahmed added that when one looks at full-time undergraduate numbers (the largest group of students who will be renting), it can be seen that there has been very healthy growth. There was a small drop after the introduction of £9,000 tuition fees but numbers have now recovered and there are more full-time undergraduates than before the tuition fee hike.
Savills points out that the middle-tier of properties offers the highest opportunity. Looking at the trends in recent years, Jacqui Daly from Savills Research points out that the appetite for student housing assets has outgrown supply. In a recent report, she said that of the £4.5bn traded in 2016, £1.1bn (25%) involved forward funding developments while £223m (5%) were development sites. Daly added that existing stock made up 69 percent of trades, the lowest proportion on record.
Meanwhile recent figures from Cushman & Wakefield suggest that the rents per bed figure in the UK increased 2.9 percent between the academic years 2016/17 and 2017/18, above the 2.7 percent increase in the previous academic period. Cushman & Wakefield suggested it demonstrated “the sustained health of the student accommodation market as a whole.”
Daly made the point that of the top 10 investors in 2016, two had not invested in the UK market at all previously. “This shows how student housing has established itself as an attractive asset class worldwide, even in the face of political risk.”
Although brexit has been a major concern for investors, Haaris pointed out, though the UK exiting the EU might have an effect on student numbers from Europe, it remains the case that UK universities are still very much held in high regard internationally. He added that the new wealth in Asia has fuelled the international student market in the UK. With some of the world’s best universities – six are ranked in the top 25 globally – more and more Asian student are seeking an English-language education. The growth from China, in particular, is growing rapidly.
Despite the downsides to student housing and the fact that it puts some investors off, Ahmed said there are ways to minimise the downsides. He added that this is why UOWN has partnered with the Parklane Group. They have vast experience with the student market and the track record, for over 30 years now. It means there is a possibility to limit risk and maximise returns.