GVA - Student Housing Market Review
The fifth annual GVA research report on the student housing market during autumn 2014 has shown that there have been significant developments in the student housing sector. The review reflects upon supply, demand and investment.
The number of university applications at the beginning of the 2014/2015 academic year, was at its highest since the maximum tuition fees were raised to £9,000 per annum in 2011. Applications from Welsh students and EU students (non-UK) increased the most over the last year at 5.2% and 7.7% respectively.
The report also shows that there were concerns that the increase in tuition fees would result in higher education becoming more ‘business-like’ with institutions competing with each other to draw in students. When the fees increased, it was found that there was a notable disparity between applications to universities lower down in the rankings (down 14.9%) and those ranked in the top 10 (up 1.9%).
According to the report, the alleviation of the cap on student numbers by an extra 30,000 for this academic year, as announced in the autumn statement, has contributed to the increase in university applications. The removal of the cap during the 2015/2016 academic year will likely add to this. The shift towards a ‘demand led model,’ GVA reports, has meant that there is a higher likelihood of competition between universities – particularly in gaining AAB+ students.
The increase in international students between 2009 and 2013 at 6% has heightened demand for purpose build student accommodation in the UK. However, there has been a particular rise in Scotland due to the offer of free tuition for EU students, meaning a 37% rise during the same years. However, latest figures show a 1% decline in applications from overseas outside of the EU, particularly from India and Pakistan, mainly thought to be a result of stricter visa controls from 2011-2013.
The report regards overseas students as being much more likely to use purpose built accommodation, especially in London.
Investment, occupier demand and development are now increasing in the student housing sector since the commercial and residential property market downturn in late 2008. Consequently, the sector is being considered a way to generate constant long term income streams. Previous high density and large scale residential developments in regional city markets that stalled due to the downturn have gained through a switch of use to institutional accommodation.
However, there was also an abrupt decrease in scheduled student housing in London. GVA reports that this was due to viability (affected by increased values in the housing and commercial property markets), alternative land uses (returns from other types residential development could have more to offer) and restrictions in supply (wariness from local authorities of over-supply in the sector).
There has been a boost in activity in the student accommodation investment market during the past 12 months. New entrants into the market and a high number of portfolios sold have meant that investment transaction volumes are staying buoyant and that there are many opportunities in the regional markets.
The GVA report further reveals that there will likely be an increase in demand for student accommodation over the next few years, and the outlook for the sector remains positive.