January 24th, 2017
UK Prime Minister Theresa May has confirmed that the UK will leave the EU’s single market, causing some uncertainty for property investors. However, the student property market has remained resilient and robust as ever.
“I want to be clear - what I am proposing cannot mean membership of the single market”, said Theresa May as she pledged to withdraw the UK from the European Union’s internal market. Regardless of her decision, the EU would not allow Britain to remain since the Prime Minister stated that controlling immigration and ending European Court of Justice jurisdiction were red lines. The student accommodation sector, however, appears to be relatively unaffected by Brexit, as its strength relies mostly on the UK’s high reputation for academic excellence and the increasing demand for student housing.
European students are known to bring great value to the UK economy and its student housing market, but the UK market does not rely on EU students. 2015 was a record year for Purpose Built Student Accommodation (PBSA), recording transactions worth in excess of £5.1bn, and industry projections have predicted that the sector is set to hit a total value of £45bn by the end of 2017. The devaluation of the pound has also attracted international investment as well as additional applications from international students, who make up a massive 26% of all tuition fee income.
The student property market has proven to be resilient in the face of change over the past couple of years, due to its ability to diversify. Universities increased the number of undergraduates thanks to the removal of the cap in place set to limit student numbers. There is speculation that the rise of tuition fees for EU students from abroad will discourage them from applying to UK universities. However, the UK is home to some of the top universities in the world and many of these students still opt to study in the UK, despite of the tuition and accommodation fees being one of the highest in Europe.
Although last year had the highest number of houses built in the student accommodation sector since the financial crisis, market uncertainty could still lead to fewer homes built in 2017. Thus, the projected demand and rent increases will continue to create investment value. Cushman and Wakefield’s report underpinned last year’s strong demand for student accommodation with the average student to bed ratio increasing from 2.1 to 2.3. As a result, last year’s average rental growth across all Purpose-Built Student Accommodation (PBSA) investment market had increased by 2.7%, making student accommodation a strong prospective market in the UK.
2017 shows great promise despite the vote to leave the EU, with rental growth high and demand from UK and international students strong.
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