June 16th, 2016
As the amount of days until the EU referendum has now reached single digits many are starting to seriously question what could happen in the event of an exit. Sterling is currently experiencing a torrid time and the markets are volatile as uncertainty grows.
The property market in general has held fairly strong but with the double whammy of the referendum and stamp duty increases concerns have grown quickly about the possibility of a significant slowdown. There was a gold rush of purchases just before the stamp duty deadline and this has seen new purchases for buy-to-let decreasing significantly.
Indeed there are those that believe in the event of a ‘Brexit’ that the property market would be hit hard as foreign investment dries up, and many look to sell up amongst the uncertainty, creating a market with plenty of supply but little demand. These are all legitimate concerns but of course, we don’t actually know what the outcome would be with no precedent set before this event.
With all these concerns in mind it’s time for investors to look towards student accommodation investment which, it is being argued this week, is set to be much more resilient to these market forces than most other BTL opportunities.
Brexit would tighten visa requirements and hike fees for EU students - but any fall in occupancy would be offset by demand from outside the EU, where students are clamouring for spots in UK universities and are willing to pay more for the privilege, the research shows.
“The student accommodation market will potentially prove more resilient to Brexit than commercial property, where there is considerably more uncertainty around occupier decisions,” it says. “If the rental market remains stable, the student accommodation investment market is likely to follow suit and prove less volatile.”
There are many reasons for this - one of which is the oversubscribed university system. In 2015, there were 7.3 applications from overseas (EU and non-EU) students for each EU student accepted, and 7.9 for each place accepted by a non-EU student - which CBRE says shows that “cost is clearly not the only consideration”.
Lower-ranked universities could be the hardest hit, as in-demand institutions will be more able to backfill places that would have gone to EU nationals.
So while the detailed impact of Brexit is difficult to predict, the industry is in agreement that the sector will survive leaving the EU.
It is a sentiment summed up well by Walter Boettcher, chief economist at Colliers International Student accommodation is a “long-term investment” and will remain an “indispensable part of Britain’s basic educational infrastructure”, whatever happens, he says.
“While investors may take a breath and wait to see the EU referendum outcome, over the longer term, student accommodation will prove resilient.”
This confirms and compounds good news for student property landlords as yields and demand have stayed generally high. The referendum has inspired doom and gloom warnings aplenty but the message seems clear; student property is a long term investment and with students all over the world providing ever-increasing demand for places and accommodation. This should provide reassurance for those already in the market and may spur landlords in other buy-to-let sectors to try it out for themselves.