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It’s ‘back to school’ for Student Housing Investors

As we round-up key messages from the Student Housing Conference 2017 yesterday, it seems that it’s ‘back to school’ for investors – do your homework, broaden your horizons and think of your future….

Do your homework
Research into where demand exists is of paramount importance in the light of significant threats to the student housing market. Brexit and its consequences for foreign students, shifting politics, slowing sector growth, UK demographic decline and construction costs will all impact the sector. The very top end of the accommodation market is now fairly saturated and the threat to higher paying international students in the light of upcoming visa restrictions may further limit opportunities.
There are also pockets of over-supply of PBSA around the country. A surplus could arise in London, Manchester and Liverpool.
Research shows that only the traditional Pre ‘92 universities are showing a growth in acceptances whilst the post ‘92 lower and medium tariff institutions are struggling to regain their pre 2012 numbers. Applications for these lower and medium tariff universities seems to be in decline with only the higher tariff group bucking the demographic trend. So, the market is working to favour the highest tariff pre 92 institutions in the context of very limited student number growth – creating significant winners and losers. We may well see the emergence of a non-Russell Supergroup of institutions.

Broaden your horizons
Typically, the postgraduate market has only received secondary interest. However, the high costs attached to undergraduate study and new loans for postgraduates make this a more attractive opportunity. With the high-end PBSA market potential diminishing, it is the mid-market accommodation for returning 3rd years and postgraduates that could present the best opportunity. However, the accommodation needs to be affordable for the returning postgrads who will also make comparisons with lower priced off street housing. There might be a return to affordable cluster flats to accommodate certain market segments – a ‘Premier Inn” of student housing offering a solid good quality product built in the right place. The European market was also highlighted as offering good growth potential with increased international student numbers offering a stable opportunity. There is rapid growth in Germany, France, Ireland, Italy, Netherlands, Spain, Poland but it is important to select the city rather than the country. The price of study in Europe is much cheaper and public sector accommodation ownership keeps the rental prices price down – a challenge for investors.

Think of your future
Looking forward, student housing is seen just one part of the picture for investors. Lines between PRS, Micro living, and retirement living are now blurring. The possibilities for micro apartments are growing as planning rules change due to housing undersupply. In Europe, one location saw young professional student interns and pensioners living side by side. Europe leads the way in this area as UK planners are currently not so receptive to different usages for the same unit/room.
Future partnerships with universities also open up options as some universities look for off balance sheet residential options to free up funds to invest elsewhere. It is predicted that university owned beds might become obsolete. Government initiatives to link industrial strategy with universities will also enable innovation in this area.
Communal areas, to facilitate group study, fitness and cinema, increasingly vie for the attention of today’s cleaner living student. Discerning students will continue to have more choices available to them than ever before. We, as you might expect, share the view that IT futures will remain key to providing students with a positive student service experience.

 

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