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What can we expect from student property in the New Year?

What can we expect from student property in the New Year?

It’s been a big year for Purpose Built Student Accommodation, or PBSA as it’s more widely referred to. An explosion in popularity, thanks largely to low entry point and high yields, has meant that 2017 could well be considered the year that PBSA entered into the mainstream.

With US and European businesses now also getting involved - there have been announcements regarding projects in Birmingham and Scotland – PBSA has begun to attract the attention of institutional investors and largescale city centre builds.

According to research, demand for PBSA is high, with the average national student to bed ratio at 2.3 students per bed space available through PBSA, up from 2.14. However, supply is restricted, which adds up to a powerful investment opportunity.

UK student accommodation has enjoyed tremendous growth over recent years, with international investment almost doubling over the last two years and institutional investors acquiring big interests attracted by compelling yields and strong capital growth.

Big growth

Research published by TaylorWessing showed that the sector will continue to be “driven by portfolio acquisitions with both new entrants and existing investors seeking to consolidate and add to their portfolios. This has already been evident in Q1 2017, with Liberty Living purchasing the £460 million Union State student portfolio from Blackstone, making Liberty the second largest PBSA provider in the UK, and Henley purchasing a portfolio of 6 student blocks from Liberty Living for circa £50 million.”

The report also noted that 2016, however, saw resurgence in appetite, with a number of high profile lenders re-entering the student lending market despite front-page questioning of the impact of Brexit on international student numbers and European research grants.

Student numbers

Student numbers have remained steady despite Brexit uncertainty, with UK numbers dropping slightly for the new 2017/2018 academic year, but European and international student numbers have remained strong.

UCAS released its own summary of student numbers from the January deadline, stating that overall, “UK applicant figures have decreased by 5% to a total of 469,490 and EU applicant figures decreased by 7% to 42,070. The number of applicants from other overseas countries is 52,630, similar to last year.

Across the UK, the number applying to higher education has fallen: from England by 6%, from Northern Ireland by 5%, from Scotland by 2% and from Wales by 7%.”

The analysis reveals that the largest decreases are for older applicants from England and Wales. In England the number of 19 year old applicants has fallen by 9%, 20 year olds by 9%, 21-24 by 15%, and 25 and over by 23%.

The report also revealed that “the number of first time applicants has decreased by 4%, whilst the total re-applying to higher education has decreased by 10%.

The subject experiencing the most notable decrease in applicants is nursing.”

Despite slightly disappointing numbers this year, there is still a huge disparity between demand and supply which is driving rental growth and capital growth.

UK higher education remains one of the world’s leading sectors and it’s unlikely that next year, or anytime soon, will reduce that prestige.

There will always be students who want to study in the UK and live here, there is, at the moment, a large disparity between beds available and students looking for accommodation. It is those ingredients that have combined to make PBSA such an attractive prospect and we fully expect that to continue into the New Year.