If the UK decides to leave the EU, student accommodation is predicted to be the most resilient sector according to new research by CBRE.
In the event of Brexit, visa requirements would be stricter and fees for EU students would no doubt increase, however, the fall in occupancy rates would be offset by a demand for UK university spots from prospective students outside of the EU, who are willing to pay more.
UK degrees are prestigious
James Hanmer, director of student accommodation at Savils said: “people still want a degree from a UK university, and that’s not going to change”.
The research states that:
“The student accommodation market will potentially prove more resilient to Brexit than commercial property, where there is considerably more uncertainty around occupier decisions”
“If the rental market remains stable, the student accommodation investment market is likely to follow suit and prove less volatile.”
For each student from the EU accepted in 2015, there were 7.3 applications from overseas, both EU and non EU. And for each non EU student, there were 7.9 applications.
Appetite from investors
Despite the fact that some UK investors are delaying their investment until after the EU referendum, the report highlights the fact that international investors still deem the “strongly diversified” revenue stream that comes from student accommodation in the UK enough reason to keep investing.
A notable example of this was when Mapletree Investments bought the Ardent UK student accommodation portfolio from the Mansion Student Accommodation Fund for £417 million in March this year.
With its 25 buildings and over 5,000 beds the purchase is representative of £75,000 per bedroom and a net yield of 6%.
Mapletree Investments, who currently manage approximately £14 billion worth of assets alongside several other trusts, announced that they were planning to expand into student housing last year.
In an interview with the Straits Times last November, Chief executive Hiew Yoon Khong stated that: “student accommodation is a big business and relatively low risk.”
James Pullan, head of student property at Knight Frank, told the Financial Times that this “demonstrates how international equity is attracted to the success story that is UK higher education”.
He also explained how a number or overseas investors are seeking UK student accommodation to “create a brand”.
In March 2015, The Canada Pension Plan Board (CPPIB) spent £1.1 billion on the Liberty Living portfolio. That same month, US company, Greystar, invested in a set of buildings for £600 million and together, Goldman Sachs and Greystar bought a £500 million portfolio.
These hefty investments brought the total amount invested in private UK student accommodation in 2015 to £6 billion, a considerably higher figure than North America according to research from UK lawyers, Addleshaw Goddard.
Since the 1990s, student numbers have almost doubled in the UK and the numbers are only anticipated to grow. The government predicts that the number of people studying at UK universities will increase by 2000,000 by 2020.
So as long as the demand continues to grow, student property will remain a lucrative investment for prospective buyers.
