The student accommodation market offers a great investment opportunity at a time when nervousness is dominating much of the economy.
Student housing remains one of the few areas untainted by the current political and economic uncertainty.
While the residential and commercial property sectors usually rapidly feel the knock on effect of economic ups and downs, student accommodation is influenced by other less volatile factors making it a safer investment.
Those factors are currently working together to ensure that student property has the potential to offer fantastic long-term returns.
Why is this?
Firstly UK student numbers continue to grow. Having experienced severe public funding cuts in recent years, universities are now under immense pressure to make sure they are commercially viable. For most, this means increasing student numbers to bring in more revenue.
This is in line with successive government’s wish to get more people to universities and other forms of higher education.
British universities are particularly keen to attract more foreign students as they pay higher fees, further boosting income. The UK wants to increase student numbers by 30% over the next decade which means demand for student housing is only going to rise for the foreseeable future.
The UK has a long standing reputation as a global leader in higher education, boasting some of the world’s most prestigious universities. The University of Oxford is currently listed as the world’s best university with Cambridge in third place on the Times Higher Education World University Rankings.
This has meant foreign students have continued to flock to the UK despite Brexit worries.
More than 560,000 students applied for full-time undergraduate courses at UK universities for the 2019/20 academic year, according to UCAS. This was nearly 2,500 more applications than at the same point last year.
The rise was driven by a record number of applicants from outside the UK which rose 5.7% from 2018. In total, nearly a fifth of all university applicants this year were from outside the UK.
Unsurprisingly, demand outstrips supply for student housing. Higher fees have bought with them an expectation of higher standards in the accommodation.
Despite increasing levels of student debt due to the fees, it is clear from the rising numbers that students still see the value in higher education. The majority continue to study away from home with about one million students now choosing to move away for university – an increase of 56% since 1999, according to Cushman & Wakefield.
The universities themselves cannot meet this rising demand for student housing so the vast majority is provided by the private sector. A massive 97% of all student beds were delivered by the private sector in 2017/18, according to Cushman and Wakefield.
With guaranteed rising demand, current under supply and very low vacancy rates, purpose built student accommodation has become a very attractive investment opportunity.
This might go some way towards explaining why global student housing investment volumes have risen by 87% in the last five years, Savills figures show.
Key considerations when investing in student accommodation
- Student demand
When identifying worthwhile student accommodation investment opportunities we look carefully at the level of demand in the specific location. Some universities have plans to expand rapidly in the next few years while others, often the better established institutions, have more stable student populations.
The location of the property is important as students like to be within easy distance of their university but also ideally, in a desirable part of their town or city with shops and amenities nearby and good transport links. This is particularly vital for attracting foreign students who are paying huge fees so want to see value in return for their spending.
The existing supply of student housing is also a key factor to investigate and weigh against the forecast increase in students. Despite big student populations, some of the longer established university cities are already oversaturated with student housing.