The student accommodation investment market in the UK has been one of the strongest property sectors to invest in for many years. Even during economic downturns, this asset class has consistently provided investors with secured rental returns.
The market has evolved rapidly over time, taking the 2008 global recession and the emergence of purpose built student accommodation (PBSA) to truly solidify the UK student housing market as one of the highest performing asset classes for investors.
Forecasts from several property experts — such as Savills — are predicting the growth to continue, giving investors further confidence, making now an excellent time to invest in UK student accommodation.
This article details the evolution of this thriving sector, and shows why investors continue to put their faith in this evolving marketplace.
The Global Recession & Rise in Student Fees
In times of financial difficulty, the younger generation is often quick to react. During the 2008 global recession, there were over 1.67 million young people in higher education, which represented the sharpest rise in undergraduates since the early nineties.
The reason for this is simple. When the economy is negatively impacted, young people look to upskill in the hopes of securing a better job and making themselves invaluable to the companies they want to work for. It wasn’t until 2013 that the UK started to recover from the recession, which left young people fearful about securing future jobs.
However, it wasn’t just the world’s economic problems that caused a rise in student numbers. Following the Browne Review in 2010, plans were put in place to raise student tuition fees from £3225 a year to £9000 by 2012. Student numbers reached 2.55 million in 2011 — the highest point on record — as many young people felt like they were put into a “now or never” situation in regards to going to university.
An increase of people enrolling on university courses created problems in the student housing market. The supply far outweighed the demand, and this didn’t leave many options available. Many had to settle for outdated halls of residence, others rented from private landlords, and many had to stay at home with their parents. There was very little suitable accommodation on the market, which investors looked to capitalise on.
An Influx of International Investment
While Western society struggled with the financial crisis, Asian and Eastern countries managed to build on their wealth and prosperity. Places such China and Hong Kong had established themselves as economic powerhouses by the early 2000s, which was helped by China joining the World Trade Organisation in 2001.
A UK education is held in high regard across the world, and many students from overseas choose to study in the UK. Chinese students in particular have a preference for the country’s educational system, as they make up nearly 20% of all UK-based students.
International investors had a vested interest in the UK student accommodation investment market. Many undergraduates from Hong Kong, China, India, Pakistan and the UAE study in the country, but it was clear that the UK didn’t have suitable accommodation for international students at the time.
A decade of investments has added a significant amount of units to the student housing market, but the number of PBSA available is still in short supply. Investors from Dubai, Kuwait and Pakistan, alongside Hong Kong and China are taking advantage of the demand while the opportunities are still available.
History is Repeating Itself
In a similar vein to the 2008 financial downturn, young people in the UK are currently concerned about the job market. Hundreds of thousands of jobs have been lost in the UK thanks to the Coronavirus pandemic, and not having a firm trade deal in place with the European Union by December 2020 could affect many of the country’s industries.
Not wanting to be left behind in the jobs market, young adults are once again signing up to attend university in record numbers. As we mentioned in our article detailing the impact of Covid-19 on the UK student property market, 40.5% of 18-year-olds in the country applied to join a course while in lockdown.
The only difference between 2020 and 2008 is that the amount of suitable accommodation on the student housing market is already far too low. University towns and cities still haven’t caught up with the demand for PBSA from years ago. Now, the demand is even greater, and more students than ever will be left looking for alternative accommodation.
International investors have a head start this time around. Many investors have paved the way for foreign investment in the sector, and are going from strength to strength. The key university cities to invest in have already been established, and emerging university towns are making the sector accessible for new and seasoned investors alike.
Capitalising on the Current State of the Student Accommodation Investment Market
The student housing market has evolved in the last 20 years. The ever-growing population combined with the emphasis on providing quality accommodation has created many worthwhile opportunities for property investors.
Students, both domestic and international, are asking for PBSA, but supplying it in such high numbers is proving to be more difficult without further financial input.
At Treo Investments, we specialise in helping international investors find the right property deals in the UK. We have the network in place and expert property knowledge, but more importantly, we will take the time to discuss your needs so we can present you with the most suitable opportunities.
To find out what Treo Investments can do to help you, get in touch with us for more information on the student housing market and the opportunities in the UK we have available.