Student housing set to grow in 2018
Student accommodation is set to grow next year as new research shows a record breaking 30,000 bed spaces were provided in the last 12 months – with more opportunities for buy-to-let investors.
The supply has more than doubled since 2014 to 602,000, according to research from Cushman & Wakefield, with rents increasing by 2.9 per cent between the academic years 2016/2017 and 2017/2018.
In Manchester, which has the largest student population outside of London, annual studio rents increased by 5 per cent, the report by the estate agent found.
En-suite rents have increased by the most in Birmingham and Bristol, up by 4 per cent, followed by Edinburgh, Manchester and Nottingham all up by 3 per cent.
En-suite rents are highest in London, at an average cost of £195 per week. In Manchester they average £142 per week, and the cheapest average weekly rent of the cities surveyed was in Sheffield at £120 per week.
The private sector dominates the supply of new developments, delivering 87 per cent of all new beds so far in 2017/2018.
However, universities continue to provide the largest number of bed spaces, offering 57 per cent of all rooms available in 2017/2018.
Overall en-suite bed spaces now represent 56 per cent of the market, whilst studios account for 12 per cent of all beds.
David Feeney, advisory associate at Cushman & Wakefield, said: “It is encouraging that the student accommodation market continues to flourish despite initial concerns following the European Union referendum and the impact of increased student tuition fees.
“However, in a number of cases studio development has been driven by higher prices rather than by true student demand, which now risks oversupply.
“En-suites and shared rooms provide a cheaper bed and more of a social experience, with communal and shared spaces.
“There is a real opportunity for developers to meet the demands for more affordable accommodation and provide more standard or en-suite rooms for students.
“Studios are 45 per cent more expensive but do they offer a 45 per cent better experience? It is all about the value of the experience and this will increasingly drive students’ preferences for accommodation.”
The demand for accommodation continues to grow, with full time student numbers now 4 per cent higher than in 2012/2013.
Higher tariff universities grew enrolments by 1 per cent, with medium tariff institutions growing by 2 per cent, proving that despite some concern about the impact of the Brexit vote on student numbers, the demand for new accommodation remains strong.
Final recorded transaction volumes in 2016 of £4.1 billion were the second highest total on record but well below the 2015 total of £5.7 billion.
Transactions in 2017 to date are ahead of this time last year at £3.61 billion compared to £3.25 billion in 2016 but unlike 2016 there is a further £1.05 billion under offer and £1.5 billion in the market, double the totals for last year.
Global education hub
“The UK is still a global education hub, attracting the best students from around the world,” added Feeney.
“Even with Britain’s exit from the EU progressing, the relatively weak Pound has attracted additional applications from non-EU students, with their numbers rising 5 per cent over the last year.
“It is a key market, as 23 per cent of the UK student population is now from overseas.
“In funding terms, foreign students have a much greater impact on the income profile of UK universities, making up 26 per cent of all tuition fee income.
“It is clear that the UK remains a highly attractive place for students to study and this continues to be reflected in the growing student accommodation market.
“The sector will continue to prove attractive to investors and if developers are able to meet student demand for en-suite rooms, rising student numbers will provide suitable and reliable returns.”
The total number of students at UK universities in 2015–16 remains broadly the same as it was in 2006–07, at around 2.3 million, though there has been a shift in the nature of the student body, with the numbers of younger students, female students, and students from a non-UK domicile growing.
Full-time, first degree and postgraduate taught courses now make up a larger proportion of provision compared to 2006–07. The demand for non-degree, part-time study from mature students has continued to decline.
The proportion of international students studying at UK universities increased from 14 per cent in 2006–07 to 19 per cent in 2015–16, according to a recent analysis of UK education.
Funding from international sources has also grown in importance, with non-EU fees accounting for 23 per cent of all teaching income and international sources accounting for 16 per cent of all research income.
In the foreword to “Patterns and Trends in Higher Education”, Paul O’Prey, vice chancellor of Roehampton University, said: “Demographic trends likely to have a significant impact include a projected upturn in the UK school-leaver population from 2021, as well as continued growth in the young population in key international student markets.”
In the last decade, privately run student accommodation has rapidly sprung up in most university towns and cities: 287 new private halls opened in time for the new academic year, with London and Sheffield seeing the greatest increase of private stock.
Student accommodation hotspots
According to research by Savills, Bath is the UK’s top hotspot for student accommodation development, because of strong demand characteristics, high occupancy levels, strong rents and good prospects for rental growth.
In second position is Birmingham followed by Brighton, Bristol, Edinburgh and Exeter.
This year saw three new places moved up to the top ten, including Exeter, Guildford and Leeds.
The London market represents the largest city in the UK for student housing. According to JLL, London’s full-time student population is expected to rise by 50 per cent over the next 10 years, which will exacerbate the existing shortfall in student housing supply.
In October, Jeremy Robinson, Managing Director of Housing Hand, said: “Just this month, the University of Brighton was granted planning permission for a new student accommodation project for £60-80 million, which will see the development of 804 rooms in two towers, with construction due to be completed by September 2019.
“These new developments are popping up all over the UK and are good news for students.
“Historically, many have found it difficult to find affordable accommodation close to universities and have had to opt for purpose built student accommodation (PBSA).
“Typically, rents are high in this type of accommodation, all though the spec is high, which proves very attractive to international students.
“Forecasts show that international student numbers are to rise by 6 per cent per year over the next three years.
“University applications from Chinese students have almost doubled over the last decade, to 14,000 in 2016.
“With the sterling – yuan exchange rate 8 per cent lower than it was before the EU referendum, this growth is expected to continue.”
Insuring for success
Carl Agar, MD at letting agent Big Red House and resident blogger here at Simple Landlords Insurance, added: “There’s no doubt that students have a bad reputation for parties, accidental damage, and unreliability, and many landlords won’t touch them with a barge pole. But there is clearly still money to be made in this market - if you go into it with your eyes wide open.
“If you want to invest in student accommodation, research your area carefully, avoid anywhere where the market is monopolised by big investors, and plan maintenance and renovation costs into your figures up-front.
“Make sure you’ve got comprehensive landlords insurance for buildings and contents, and make friends with the neighbours! They’ll help you keep tabs on your properties. Regular inspections are also going to be key.
“Finally, check the rules. You might need an HMO licence, a University licence, and beware of Article 4s which could limit the number of HMO properties in your target area.”