Student housing supply failing to keep pace with demand
Friday, 25 November 2016
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GVA’s latest Student Housing report reveals that there is a structural shortfall of purpose built student accommodation (PBSA) in the UK, failing to keep pace with the increasing demand.
The student housing sector has seen recent growth, driven by the rise in the number of full-time students, returning to levels seen before the government’s tuition fees hike in 2011/12.
While most UK universities guarantee accommodation to first year students, they have been unable to meet growing demand from returning second and third years. In addition, a growing proportion of their stock is in need of capital expenditure to update facilities. The private sector is responding to these demands by developing PBSA aligned with student needs.
Whilst the private rental sector offers an alternative option for students, it has become subject to greater local authority and government legislation for houses in multiple occupation (HMO). In addition, the recovery of the residential property market over the last few years has increased land values and pressure on the sector to house tenants who are willing to pay higher rents than students. For many students, the private rental market is often unaffordable for students, particularly in places where leading universities are located, such as London, Oxford, Cambridge and Manchester.Click here to download the full report.
GVA’s report examines the ownership of purpose-built student accommodation in the main student towns and cities across the UK, covering over 70 universities. Over a quarter of the markets analysed in the report have a share of 40% or higher for purpose-built beds.
The highest concentration of beds is in London, with over 57,000 beds, of which 24,006 are university-owned. The average weekly rent for purpose-built accommodation in the capital is £221 per week for 2016/17, the same as last year, whilst the average outside of London is £147, up from £141 in 2015/16.
Oxford and Cambridge have the highest share of purpose-built beds at 58% each, largely due to the universities’ collegiate system. Strong investor and student demand has increased the supply of PBSA in recent years, with investment totaling almost £2 billion with over 30,000 beds sold between Q1 and Q3 this year, although this is down on the record total of £4.3 billion (40,000 beds) for the same period last year.
Cities with large full-time student populations, but a relatively small number of purpose-built beds, such as Cardiff, Norwich and Brighton are also stand-out locations for developers and investors to target. Central London and the neighbouring markets of Greenwich and Kingston also remain under developed in terms of student demand however there are concerns about the potential schemes in the pipeline in some locations.
Roger Lown, Senior Director and national head of Student Accommodation at Bilfinger GVA, comments: “The fundamental benefits of investing in UK student accommodation have not been altered by the referendum result, which include its recession-hedge characteristics, steady rental growth, ability to deliver a stable income and the long-term demand associated with it. The uncertainty created by Brexit also makes a ‘safe asset’ such as student housing more attractive to investors.”
“Brexit has not discouraged new entrants to the market, such as Singaporean Investor, Mapletree, which made its first acquisition earlier this year and US-based developer, Hines, also acquired 1,000 beds from McLaren Property.”
The non-EU international market is vital for universities as they can charge above the current limit of £9,000 tuition fees. In total, there were 391,930 full time overseas students in the UK in 2014/15. According to Universities UK, almost 125,000 of these were from the EU, of which students from Germany, France and Ireland comprised 29%.
According to UCAS, the number of EU students placed at UK universities has increased by 11% on the same period last year. Despite this, preliminary figures from UCAS for 2017/18 entry to Oxford and Cambridge and medicine, dentistry and veterinary courses elsewhere are showing a fall of 9%.
Home Secretary, Amber Rudd announced in October that there would be major new restrictions on overseas students however a previous crackdown on student visas has already hit the student intake from some countries, particularly India, where student numbers are down 18% from 2012/13. This has been partly offset by an influx from China, totaling 105,000, making up by far the biggest overseas contingent.
For more information on GVA’s Student Housing Review 2016, please contact Roger Lown, Head of Student Housing at Bilfinger GVA on 020 7911 2862 or firstname.lastname@example.org Brexit fearing property investors look to student housing (Evening Standard, 30th November 2016)