Expanding opportunities as the UK student housing market matures

Growth in UK student housing market 

 

We have long argued that student housing is a mainstream option for property investors. Even without the recent moves to liberalise access to university, the calibre of institutions now active in the market demonstrates its maturity, with high-profile institutions such as Goldman Sachs Asset Management, Greystar and Canadian Pension Plan actively gaining exposure.

Their interest in acquiring purpose-built student accommodation in scale has in turn given developers new confidence in the liquidity present in the sector. Consequently their appetite to build large-scale portfolios involving 5,000 beds and more has grown.

The starting point is, of course, demand from the students themselves, which is only likely to increase following two supportive moves from the Government: the scrapping of the grade qualification capping universities’ freedom to offer places and the replacement of maintenance grants with a new, larger student loan.

The first move is already having an impact on student numbers. The admissions body UCAS reported that more than 491,000 students had been admitted to a course of higher education by the end of August, a 3% increase on last year. That may not sound like a lot, but it represents around 15,000 students and they all need to be accommodated.

The impact of the new student loan on numbers is less clear but it is worth noting that, at £8,200 a year, it is the biggest single support yet made available to students, which is likely to have a positive effect. Judging by recent years’ figures, student numbers are on the rise anyway. According to UCAS.com, applications totalled more than 635,000 in 2013, rising to 659,000, in 2014 and 673,000 this year.

Student numbers are of course critical to the health of the student housing market but this is of course just the beginning: the stock needs to exist to provide an investment opportunity. From that perspective, the market is in a phase of very strong growth. £5 billion of purpose-built student accommodation has been transacted this year, double last year and higher than it has ever been.

With those figures in mind, it is now generally acknowledged that student accommodation, having previously been classed as an alternative property sector, is now viewed as a mainstream market in the same way that offices, industrial property and – perhaps – even the residential market are viewed.

Investors should of course temper their expectations on the growth of the market in line with capacity. While universities are now free to set their own numbers, they cannot double the size of their intake overnight. Meaningful increases in admissions require investment in new buildings and facilities.

We are positive on this, though: universities typically have strong balance sheets and access to third-party funding. In the towns in which we are active as a funder we are seeing new campuses, science wings and other facilities being built to accommodate greater numbers.

While the need to add to existing infrastructure acts as a natural lag on admissions growth, this dynamic will act in support of the market. Investors can take comfort from the fact that universities are investing in this way, underlining the fact that the growth in student numbers – and therefore demand for accommodation – are sustainable in the long term.

Other factors in support of the market include the commitment, from most if not all universities, to provide first-year accommodation to students. Much of this is in the form of purpose-built accommodation.

We are also seeing a general shift in mindset as students’ own expectations and preferences change. Previously, it was accepted that the typical university experience involved a house of multiple occupation (HMO) accommodating at least four or five occupants. Increasingly, though, students’ expectations go beyond this. They want a purpose-built accommodation block, with security and the convenience of all bills paid in one amount.

We believe this – “HMO2” – is likely to be the future for student housing and in certain instances, local councils are very much encouraging the development of purpose-built student housing stock. There are obvious benefits to containing expanding student numbers in a well-managed area but, more importantly, it releases much-needed housing to the permanent population in university towns.

This solves a serious headache for councils, who are responsible for housing people who have been priced out of their locality by students. As student numbers rise, more and more local authorities will have to confront the problem of them piling into the suburbs. No one is building Victorian streets anymore, but the development of a large scale buildings housing 500+ students would help solve the problem.

I believe that’s the future – as student accommodation becomes more firmly established in the mainstream property market, and that’s how I see the market developing: strong, centralised, controlled assets with critical mass meeting a sustainable annual demand. Those are the kinds of assets the institutional investment market wants to own.

 

Come and hear Mark Bladon discuss student housing in more detail during his panel session at MIPIM UK this October!

Election impact and growth areas in student housing

Following the lifting of the cap on student numbers and the scrapping of maintenance grants, universities are expecting a rush of applications.  Where are the implications for investment in this growing sector? Speakers: Paul Tebbit, Director, Blackrock, Richard Simpson, Managing Director – Property, Unite, and Mark Bladon, Structured Property Finance, Investec. WEDNESDAY 21ST OCTOBER 15.15 – 16.00 Blue Room

 

Click below for more specific information on other “housing” conferences:

FROM SOCIAL HOUSING TO SUPER-PRIME

THE HOUSING SHORTAGE AND RISING INEQUALITY

WHAT IS THE PLAN TO INCREASE SUPPLY IN THE HOUSING MARKET?

 

 

 

Mark BladonAuthor Mark Bladon is in the Structured Property Finance team at Investec Bank 

For more information on Investec Structured Property Finance, visit: https://www.investec.co.uk/private-clients/property-finance.html

Or call: +44 20 7597 4720

About Author

Avatar

336 Comments

  1. Avatar

    Hi, I do think this is a great site. I stumbledupon it 😉 I
    may revisit yet again since i have bookmarked it.
    Money and freedom is the best way to change, may you be rich and continue to
    help others.

  2. Avatar

    I know this if off topic but I’m looking into starting my own weblog and was wondering what all is needed to get set up?
    I’m assuming having a blog like yours would cost
    a pretty penny? I’m not very web smart so I’m not 100% positive.
    Any tips or advice would be greatly appreciated.
    Thank you

  3. Avatar

    Simply desire to say your article is as astonishing.
    The clearness on your publish is simply cool and i can suppose you are an expert in this subject.

    Fine together with your permission allow me to clutch your RSS feed to keep up to date with approaching
    post. Thank you 1,000,000 and please keep up
    the enjoyable work.

  4. Avatar

    I’ve been browsing on-line more than 3 hours these days, but
    I never discovered any attention-grabbing article like yours.
    It is lovely worth sufficient for me. Personally, if all webmasters and bloggers made good content as you did,
    the internet might be a lot more helpful than ever before.

  5. Avatar

    Hi there, i read your blog occasionally and i
    own a similar one and i was just curious if you get
    a lot of spam comments? If so how do you reduce it, any plugin or
    anything you can advise? I get so much lately it’s driving me crazy so any help is very much appreciated.

  6. Avatar

    It is appropriate time to make some plans for the future
    and it is time to be happy. I’ve read this post and if I could I desire to suggest you
    few interesting things or advice. Perhaps you can write next
    articles referring to this article. I want to read more things about it!

  7. Avatar

    Everyone loves what you guys are up too. This type of clever work
    and reporting! Keep up the very good works guys I’ve incorporated you guys to our blogroll.

  8. Avatar

    Asking questions are genuinely nice thing if you are
    not understanding anything totally, but this article presents pleasant understanding yet.

  9. Avatar

    Hi, Neat post. There is an issue along with your website
    in internet explorer, could test this? IE still is the market leader
    and a huge portion of other folks will pass over your magnificent writing because of this
    problem.

  10. Avatar

    I’ve been surfing online more than 3 hours today, yet I never found any interesting article like yours.
    It’s pretty worth enough for me. In my view, if all website
    owners and bloggers made good content as you did, the web will be a lot more useful than ever before.

  11. Avatar

    After I originally left a comment I appear to have clicked the -Notify me when new comments are added-
    checkbox and now each time a comment is added I receive
    4 emails with the same comment. Perhaps there is a
    means you are able to remove me from that service?

    Appreciate it!

  12. Avatar

    Woah! I’m really digging the template/theme of this site. It’s
    simple, yet effective. A lot of times it’s very difficult to get
    that “perfect balance” between user friendliness and visual appearance.
    I must say you’ve done a amazing job with this. Additionally,
    the blog loads super quick for me on Internet explorer. Exceptional Blog!

  13. Avatar

    Thank you for the auspicious writeup. It if truth be told used to be a entertainment account it.

    Glance complex to more brought agreeable from you!
    However, how can we communicate?

  14. Avatar

    Hi, i think that i saw you visited my blog so i came to “return the favor”.I am attempting to find things to improve my site!I suppose its ok to use some of your ideas!!

  15. Avatar

    Hello There. I found your blog using msn. This
    is a very well written article. I’ll make sure to bookmark it and come back to
    read more of your useful info. Thanks for the post. I’ll definitely comeback.

  16. Avatar

    Everything said made a bunch of sense. However, what about this?
    suppose you were to create a awesome headline? I am not saying your content is
    not good, however suppose you added a post title that makes people want more?
    I mean Expanding opportunities as the UK student housing market matures is a little
    vanilla. You ought to peek at Yahoo’s front page
    and watch how they create post titles to get
    people to open the links. You might add a related video or a
    picture or two to get readers interested about what you’ve written. In my opinion, it could
    bring your blog a little livelier.

Leave A Reply