Student Accommodation Sector Benefits from Soaring Foreign Investment
Research by estate agent Savills shows that investment in purpose-built student accommodation (PBSA) has increased by 17% to over £5 billion this year. Confidence in the market remains high and any perceived fear over last year’s Referendum haven’t come to fruition.
Much of this recent investment is because of international backers who’ve increased their market share to 64% from just a third in 2015.
This in turn has helped the market grow significantly over the past two decades, with yields remaining stable throughout. In addition, rent increases of 3% per annum since 2014 surpassed all other real estate asset sectors, with potential for even more growth in the future.
Overall, the amount of private student accommodation remains well below student numbers in key UK university cities – something we’ve recognised at Aspen Woolf with a range of carefully selected student property at our disposal.
Interest from abroad has been the primary cause of large-scale investment in the PBSA market, with Asian financiers particularly active. For example, a massive £1.2bn came from two of Singapore’s leading real estate developers last year, fending off stiff competition from the US, Middle East and Russia.
This echoes what is happening throughout the sector as rival bidders often vouch for the same investment portfolio. Unsuccessful bidders retain a strong appetite to invest here however, and are expected to make more acquisitions throughout the 2017/18 academic year.
The student sector in the UK has remained a reliable asset class for many years now. Being ‘countercyclical’ in nature, it’s less likely to suffer from volatile markets or currency fluctuations. Shrewd international buyers therefore recognise it as a dependable hedge against other investments.
The EU referendum result didn’t do much to put off foreign investment, mainly because the supply and demand of student property will always hold up. UK universities are some of the most highly regarded learning institutions in the world after all, and keep attracting students from home and abroad every year.
The value of trade also backs this up. Since the Brexit result, more student real estate was purchased in the six months after June 23rd (£2.1bn) than in the six months before (£1.9bn).
Why the UK?
The student sector is ripe for investment for two main reasons – a constant volume of demand and a severe shortfall of suitable accommodation.
This is specifically related to purpose-built flats which students now tend to prefer, primarily as they offer a much more modern standard of living. Private student en-suite studios within communal buildings come with all-inclusive bills, high-speed internet and on-site facilities such as free parking, laundry rooms and even gyms or cinema rooms in some cases.
Conversely, traditional house sharing arrangements can leave students stuck in run-down, unsecured properties with untrustworthy landlords. By investing with Aspen Woolf, everything is managed so the tenant has far less to worry about in this respect.
For prospective investors, remember that undersupply in the sector will virtually guarantee enquiries, especially in prime areas near to a campus or transport links. University halls aren’t often upgraded to the modern standards of PBSA, meaning any new developments are snapped up quickly, especially by foreign students and postgraduates.
If you’re interested in investing in purpose-built student accommodation, get in touch today to see how we can help.
If you would like more information on investing in student accommodation, you might be interested in discovering why Student Properties Are a Safe Bet for 2017.