This year has had an unprecedented amount of uncertainty in such a short space of time – the country brought in the new year with the uncertainty of Brexit ahead and now, we are currently experiencing one of the biggest pandemics in our lifetime. Understandably, this is a very questionable time for investors and there are many questioning if they should be expanding their portfolio at all this year.
However, amidst all the uncertainty, it’s clear that Purpose Built Student Accommodation (PBSA) continues to be one of the most viable investment options in the current climate. In a recent report by Savills, investment into student accommodation increased by 68% in 2019 and had reached a value of 8.8bn Euros. Additionally, investment into the European PBSA market is set increase by another 13% in 2020. The UK market continues to be the location of choice for many PBSA investors. In Savill’s research, it was revealed that the UK accounts for 70% of the student accommodation stock across Europe - this is followed by France, Germany and the Netherlands.
While these figures are very positive, there are a number of unprecedented economical threats, the biggest of which is the current Covid-19 outbreak which is causing the economy to be extremely volatile and stock markets to plummet. The residential property market is still performing well, however, residential landlords have the added stress of tenants losing their jobs and potentially falling behind on their rent. The government has vowed to help both tenants and landlords who have been affected by Covid-19 but it could potentially be tricky in the aftermath of the pandemic.
This is why student accommodation is a good investment option in the current climate - PBSA landlords have a steady stream of income and their tenants usually pay their rent up front every term, so it would be more difficult for them to fall behind on their rents in this difficult time. If they do start to struggle financially, they are more likely to have the support of their family or student finance. On top of this, the market is still largely under supplied so there is still a lot of demand for Purpose Built Student Accommodation. According to figures from the Higher Education Statistics Agency (HESA), the number of students who are opting to stay in private student accommodation increased by 10,000 in the 2018/19 academic year and has increased by 36% in the last five years.
There is currently a shortage of university-owned accommodation and as the UK continues to be more attractive to students around the world, universities will have to rely more on PBSA to house students.
Vincenzo Raimo, the Chief Relationship Officer at the student accommodation portal Unilodgers, says: “With the expected growth in the university sector over the coming decade more private halls are going to be needed to keep pace with demand. The uncertainty that universities face in terms of future income and the desire to increasingly focus on core academic services means that most don’t have access to the resources to build their own accommodation to meet growing demand.”
Partnerships which PBSA and universities are developing and are “vital if universities are to meet future demand in terms of both volume and quality”.
We are currently going through uncertain economic times, but investors can certainly regard student accommodation as a viable investment option in these difficult times.
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