May 9th, 2017
Research released this week suggests that there is large scope for building more student accommodation in the UK’s university towns. Increasing numbers of students are looking for Purpose-Built Student Accommodation (PBSA) and there is a willingness to allow more new projects over the coming years.
The research released by JLL Real Estate took into consideration the supply and demand in a total of 79 university towns and cities, including London. They concluded that most are undersupplied considering the expected demand in the coming years.
The report concluded that: “While a quarter have purpose-built student accommodation to house more than 40% of their students, just under half have supply levels for less than 30% and some locations, such as Belfast, Worcester and Sunderland, have supply for less than 20%. Many areas have a lack of private accommodation in particular.”
This provides opportunities for developers looking to develop new projects in towns and cities with existing student populations and, in particular, those with tight restrictions on Houses of Multiple Occupation (HMOs). The restrictions make it difficult for landlords to turn family or residential homes into rooms for students, and so the requirement for PBSA’s is much greater.
Many local councils have been enforcing what is known as Article 4, restricting the ability of landlords to convert their properties. The report also revealed that of the 78 university cities and towns surveyed outside London, 39.7% have enforced Article 4, including places with large student populations such as Birmingham and Manchester. A number of towns with low levels of PBSA relative to the size of their student populations have also enforced Article 4, including Brighton, Plymouth and Hull, making the case for further development stronger still.
Those combing over the figures have said that demand for PBSA is only going to increase over time despite student applications for the 2017-18 academic being down on the previous year, with many noting that demand from overseas for a UK university place has increased. This correlates with a sharp rise in foreign investment into the PBSA sector, with the Singaporean sovereign wealth fund GIC investing hundreds of millions into the sector earlier this year with the purchase of Aston Student Village in Birmingham.
The report confirms that PBSA will become an even more popular asset class in the immediate to medium term future with stable incomes and rising values playing a big part, but aside from that the ability to purchase and invest in established and high performing areas such as Manchester, Nottingham and Leeds remains attractive as well.
Foreign investment as well as domestic remains strong and all indicators are that PBSA will continue to be built across the country with demand showing no signs of tailing off, those looking to invest for this tax year should be making their plans now.
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