Towards the end of 2019, the main concern for international property investors in the student market was Brexit. Thankfully, the results of the UK General Election held in December brought a significant amount of stability back to the market.
Yet as we approach the start of the 2020/2021 academic year, Brexit has become something of an afterthought due to the global pandemic caused by Covid-19.
There is no denying Covid-19 has had an impact on the UK PBSA, with students left wondering if it is safe to come back to the UK. However, while these are valid concerns, it is important to remember the issues currently surrounding the student property market are only temporary.
The UK is still considered one of the best markets in the world for student property investments due to the ever-growing student population. In the next few years, it’s predicted there will be more 18 year olds from the UK enrolled on a university course than ever before, and the prestige that comes with attending a UK university still holds a lot of appeal with international students.
Covid-19 is affecting student accommodation, but the impact is not as negative as first thought. By analysing the market, we believe the pandemic has done very little to affect the long-term viability of student accommodation investments.
The International Student Market
We won’t pretend that the international student market will be as strong as it was pre-Covid. Universities UK — an organisation that helps maintain university standards across the UK — has predicted the loss of international students this year could create a shortfall of £7 billion. However, it is worth noting that this is a worst-case scenario, and the fallout is very unlikely to be this high.
There are currently 120,000 Chinese students in the UK, making them an important part of the student market. Many students who applied to study in the UK are contemplating the risk of going to Britain, but the predicted percentage of cancelled university applications from China is very broad, ranging from 12% to 61%.
While there will be an undeniable drop in overseas students coming to the UK this year, the director of Universities UK International, Vivienne Stern, remarked that international students were showing more confidence in their decisions to come to the UK to study. A survey conducted in March showed us 29% of Chinese students said they were going to delay their university plans. By June, only 1% had actually followed through.
Many international students do not want to cancel their university placement, and are waiting to see how the Covid-19 situation either improves or declines in the UK before making a decision. At the time of writing, the spread of the virus is on the decline in the UK with face masks now mandatory in enclosed public spaces and consequences being enforced for breaking social distancing rules.
The Importance of Domestic Students
A lot of importance is placed on international students when it comes to supporting PBSA in the UK, but domestic students are just as integral.
During the UK’s lockdown, 40.5% of all 18-year-olds in the UK applied to go to university, a record-breaking percentage. When the job market is hit hard in the UK, young people will look to gain new qualifications so they can improve their chances of securing long-term, steady employment.
Among all the applicants in the UK, 358,860 have been accepted onto a university course, which is a rise of 2.9% from last year. 316,730 got into their first choice of university, an increase of 2.7% from the 2019/2020 academic year.
This has been a unique year for university applications, and the controversy surrounding how exam results were determined has caused a lot of backlash in the UK. However, this can only be good news, as successful appeals will result in even more domestic students attending university.
The Government is trying to make amends for the A-Level and BTEC results fiasco, promising students who achieved their required grades that they will get into their first choice university. This could mean differing for a year or taking a different course, but it has ensured that for the next few years, we will see an influx of students looking for suitable accommodation.
Has Covid-19 Affected Student Accommodation?
PBSA has been one of the UK’s strongest asset classes over the last decade and has grown at an exceptional rate. Even if the number of international students in the UK this year were to drop, there is still a shortage of suitable accommodation falling to meet the demands of domestic students.
Property investors worldwide are realising this and are continuing to invest in this thriving sector. In June, one company helped broker a £90 million investment opportunity for a private investor based in the Far East, showing how much confidence there is in the market.
Outside of Covid-19, it is worth remembering the UK is set for a significant influx of domestic students over the next ten years. Predicted numbers suggest there will be an extra 135,000 students from the UK enrolled on a university course by 2030, meaning a smart investment now is more likely to bring you success in the near future.
Making a Safe Investment During the Pandemic
Student accommodation has always worked best as a long-term investment. Covid-19 has created a few issues, but all of them have short-term implications.
When it comes to investing in PBSA, knowing the right university town and location will put you ahead of many other property investors. The global pandemic has caused some investors to be reluctantly cautious, but with the right guidance, you can capitalise on the opportunities they are missing out on.
At Treo Investments, we specialise in PBSA. We are best placed to advise you on the most promising developments currently on the market. Our team will take the time to understand what it is you want from an investment, so we can source the right deal for you.
For more information on the UK’s leading student accommodation developments, contact the team today.