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Rapid growth in student accommodation investment this year

Rapid growth in student accommodation investment this year

Last year, the result of the referendum on membership of the European Union sent shockwaves across the country with many domestic and international investors pondering the future of UK property and whether it will remain a safe investment. However, according to recent reports published by Savills, any fears over Brexit seem to have subsided in the student accommodation sector which has grown by 17% over the last year.

Market performance in 2016 was slightly below the more than £6bn of student housing changing hands in 2015, highlighting the difficult circumstances of the EU referendum, but overall it was another excellent year. Momentum has been regained and the UK student housing market is performing impressively this year.

With the Sterling fluctuating, the housing market has tightened and there has been an influx of international investors taking advantage of UK property at a discounted rate. The amount of international wealth flowing into the market has almost doubled since last year, with investment from the Far East dominating. This surge reflects Singapore’s sovereign wealth fund GIC and real estate developed Mapletree, which in total spent around £1.2bn on UK student accommodation last year.

Not only has the student property market been boosted with the increase global investment, the number of international is also expected to grow 6% per annum. Britain has traditionally attracted more foreign students than any other country except the United States of America, so foreign student cuts could be detrimental for UK universities, whilst certain courses would struggle to survive. While 69% of people agree that immigration must be stricter, only 29% regard students as immigrants. The benefits brought to the UK by international students are widely recognised and substantial.

Otherwise, confidence in the market continues to be high with global investment flooding into the student accommodation market. According to Savills, some locations around the UK are underperforming, with many investors looking at prime hotspots such as Manchester where there is a chronic undersupply and strong demand. Manchester has thrived in part due to the reputation of its two universities and the ability to attract more foreign students who flock to the city looking for a world class education and student experience. Other university cities and towns are also performing well with nearly half having supply levels lower than 30%, according to JLL reports. This only highlights the room for growth in a sector which is massively oversubscribed. For example, the University of Salford houses fewer than 10% of its students, leaving more than 90% in competing for the scant private accommodation available near the University.

The outlook for UK student accommodation investment is looking very positive with strong appetite in the market. Savills claims that last year 68,000 beds were traded last year with a value of £4.5bn and it is forecasted to rise to £5.3bn traded in 2017, which equates to 75,000 beds. Following Brexit, development prospects have heightened in prime markets and investors are keener than ever to pay premiums for larger portfolios.

Looking to invest in student property in one of the UK’s booming student cities? Have a look at our available investment opportunities today!