Brexit Uncertainty Shows No Effect on Student Accommodation Investments
Purpose built student accommodation (PBSA) investments form part of many investors’ portfolios across the UK and overseas.
The demand for student housing has been growing over the past couple of decades as the student population is increasing at a significant rate and the numbers for modern student housing has had to rise to meet growing demands. Despite current worries and uncertainty surrounding Brexit, the sheer number of students applying for universities is remaining constant and even rising in some sectors.
Ultimately, PBSA has become one of the best performing asset classes for long term returns and high rental yields.
The effects of Brexit plans and how they are aiming to influence investors and their view of student accommodation remains ambiguous. However, current research has proven that these fears are misplaced as Brexit doesn’t appear to have affected student numbers and inflicted no negative effect on the level of student accommodation investments.
Trends in Students Numbers in a Pre-Brexit World
Statistics show there has been a steady increase in student applications to educational institutions in the United Kingdom, leaving many university hotspots thriving.
2012 saw a major spike in the monetary level of tuition fees as they reached their all-time maximum, but despite the burgeoning figures the numbers of students embarking on university education continued to escalate substantially.
According to data from UCAS (Universities and Colleges Admissions Service), students aimed to beat the imposition of the impending tuition fee rise in 2012. As a result, the number of student applications rose from 408,000 to 465,000 the year before the fee changes materialised.
Research published by UCAS showed that:
- Four weeks after A-level results were published in 2013 – a year after the rise in tuition fees – the number of UK and EU students admitted to study for undergraduate degrees increased by 9%.
- Rises in student numbers across each of the 4 UK countries – a 3% increase in England and Scotland while Wales and Northern Ireland were up by 1%.
- 11% increase in the number of EU students accepted in a UK university, while 6% increase from other international students.
- In 2016, the total number of students applying to UK universities increased with applications from EU students increasing by 7.5%
- Between 2012 and 2016 the total number of applications increased from over 50,000 to nearly 600,000.
The Rise in International Students
International student numbers remain unhindered surrounding an unpredictable Brexit and international students from overseas, especially from the EU, have accumulated to a large proportion of overall applicants.
Student funding, when applying from overseas and the EU, will continue and be honoured throughout the duration of the applicant’s course, confirming the speculation surrounding the funding is unaltered. Universities stand confidently and unaffected regarding the numbers of EU students applying to study in the UK post-Brexit.
Funding gives overseas students confidence in their educational experience in the UK and has imposed little change in the number of EU students.
Professor Alastair Buchan, Oxford University’s head of Brexit strategy, claimed that the institution has seen a 10% rise in the number of international applications from the EU.
How are Investors Affected by the Demand for Student Housing?
The increase in student numbers and demand for student accommodation presents a positive correlation, as one increases, so does other. Lack of stock on the market has instigated an undersupply in property as universities have been struggling to provide their students with university-owned campus accommodation.
RWInvest, a property investment company based in Liverpool recognise the potential of the flourishing student market and the lucrative opportunities available to a prospective investor and suggest:
“University owned accommodation cannot keep up with this demand, which has resulted in more than 70% of students now looking for privately owned accommodation. With demand high and supply low, investors can benefit from high tenant demand and low entry prices on student investment properties, with high annual rental income.”
The undersupply of PBSA has initiated room for growth in this sector. Since 2014, the number of UK university applicants has increased by over 13000. As well as the influx in students, these student’s expectations on market conditions have also increased. Premium student accommodation with high spec amenities and up to date appliances have become progressively more popular amongst students compared to twenty or so years ago.
Greater profits for investors will be available in main cities hosting numerous educational institutions, especially in ‘hot spot’ locations such as Manchester, Liverpool and Leeds.
As well as domestic investors in the UK, international investors are continuously entrusting their money in the thriving UK student market and statistics demonstrate an increase in their market share from 35% in 2015 to 64% in 2016.
Kindly shared by RWInvest