The Rise of Investment in Student Accommodation

It’s safe to say that Brexit has rocked the boat a little in terms of what the future holds for the United Kingdom.

Despite initial worries, it seems like Brexit might not actually have too dramatic an impact on the student accommodation sector. Recent statistics from Savills have shown that investment in accommodation is set to increase by 17% this year, showing that Brexit hasn’t exactly scared people away from the thought of university.

At the end of last year, we predicted that the market wouldn’t suffer much from Brexit. Interest from students considering studying at university is continuing to grow in the UK, so it’s important to highlight the fact that the UK student market doesn’t actually rely too heavily on EU students anyway.

There is still major interest in student accommodation, with billions worth of funding and investments still coming in across the country. So, what exactly is going on? We’ve taken a look at why the student accommodation market is as stable as ever.

Investments in student accommodation are increasing

The recent general election results are set to increase tuition fees to £9,250 a year for new students from September. Whilst many would think this would decrease the number of people choosing to go to university, the opposite could actually happen.

Billions of pounds’ worth of investments and funding are expected to be put into the student accommodation industry. In 2016, £4.5bn was spent in the purpose-built student accommodation market, and this year that figure is set to increase to £5.3bn.

The market has actually received increased interest from international investors too. Their market share increased from 35% in 2015 to 64% in 2016, showing that Brexit isn’t deterring overseas investors.

Particular Interest from the Far East

In Singapore alone, thanks to the country’s sovereign wealth fund and real estate developers, £1.2bn was spent on UK student accommodation in 2016 – covering more than a quarter of the total money spent in developing the market. In fact, one particular developer from Singapore bought a £417m portfolio from Ardent/Mansion.

Benefits to a Weak Pound?

The weakened strength of the pound may not be great for the country, but there is actually a strong benefit to the industry that comes with a weak GBP.

As exchange rates become more favourable to international investors dealing in other currencies, such as the euro or the US dollar, there is the potential for international buyers to save a lot of money by investing heavily in UK property.

A report by REM Online found that the UK’s student accommodation industry receives 10 times the amount of investment that Germany’s does. This is despite the fact that Germany has one of the lowest tuition fee levels in Western Europe, which just goes to show just how strong the UK industry is in terms of competing against other countries.

Take the Fast-Track

If recent government plans become reality, there will be an introduction of fast-track degrees that offer students the chance to study at university over a shorter period of time.

These courses will help increase the on-going demand for the student accommodation market, as there is the potential that more students will go to university seeking these newly-designed courses.

The Future of Student Accommodation

With investment in student accommodation expected to rise by 17% in 2017, it seems like the UK market will be able to survive a Brexit future.  Recent statistics from JLL found that across 79 cities and towns in the UK, including London, there was a supply shortage for student accommodation.

Half of the cities surveyed had supply levels below 30%, which indicated a strong need for further student accommodation development in the country.

In the report from Savills, some of the most up-and-coming cities for investment in student accommodation include Exeter, Manchester, Birmingham and Leeds. This is due to the popularity and successes of their universities alongside a currently low level of student accommodation properties.

For more predictions and insights on the future climate of the student accommodation sector in the UK, read our latest guide on what we expect to happen.

If you’ve already invested in student property in the UK, then you’re going to want to ensure that you know what furniture students are wanting in their properties in 2017.

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