Expanding opportunities as the UK student housing market matures
We have long argued that student housing is a mainstream option for property investors. Even without the recent moves to liberalise access to university, the calibre of institutions now active in the market demonstrates its maturity, with high-profile institutions such as Goldman Sachs Asset Management, Greystar and Canadian Pension Plan actively gaining exposure.
Their interest in acquiring purpose-built student accommodation in scale has in turn given developers new confidence in the liquidity present in the sector. Consequently their appetite to build large-scale portfolios involving 5,000 beds and more has grown.
The starting point is, of course, demand from the students themselves, which is only likely to increase following two supportive moves from the Government: the scrapping of the grade qualification capping universities’ freedom to offer places and the replacement of maintenance grants with a new, larger student loan.
The first move is already having an impact on student numbers. The admissions body UCAS reported that more than 491,000 students had been admitted to a course of higher education by the end of August, a 3% increase on last year. That may not sound like a lot, but it represents around 15,000 students and they all need to be accommodated.
The impact of the new student loan on numbers is less clear but it is worth noting that, at £8,200 a year, it is the biggest single support yet made available to students, which is likely to have a positive effect. Judging by recent years’ figures, student numbers are on the rise anyway. According to UCAS.com, applications totalled more than 635,000 in 2013, rising to 659,000, in 2014 and 673,000 this year.
Student numbers are of course critical to the health of the student housing market but this is of course just the beginning: the stock needs to exist to provide an investment opportunity. From that perspective, the market is in a phase of very strong growth. £5 billion of purpose-built student accommodation has been transacted this year, double last year and higher than it has ever been …