Real estate firm predicts strong growth for student accommodation
Real estate firm predicts ‘perfect storm’ for student accommodation
With growing numbers of students heading to university and a declining number of private student homes to rent, one real estate firm is predicting a ‘perfect storm’ for the student accommodation sector.
That’s the view of Savills which says that there is now a ‘compelling need’ for more purpose-built student accommodation sector (PBSA) homes to be built across the UK.
The firm says that with 2.2 million full-time students, there are three students for each PBSA bed.
And in a report, Savills says this is creating a growing strain on the private rented sector (PRS) - and things will not improve in the short term so there will be a ‘perfect storm’.
Full-time student population in the UK
Savills points to Higher Education Statistics Agency data for 2020/21 that saw the full-time student population in the UK grow by 8%.
Also, there was a record for UCAS applications with 750,000 young people wanting to go to university, with more than 560,000 acceptances - that’s the second highest ever recorded.
Despite this growing demand from students to go to university, the number of student homes to rent in the PRS is shrinking.
And with a declining level of stock, rents are soaring – Savills says that rents last year grew by 10%.
Universities trying to deal with an accommodation shortage
That rocketing demand has led to several universities trying to deal with an accommodation shortage, including moving students to live in neighbouring cities and towns while some universities have put students up in hotels or have added bunk beds to dorms.
The firm’s research points to strong rental growth of more than 7% in 24 UK cities that have large student populations.
However, student landlords in Salford, Manchester and London all recorded rental growth of at least 15% last year.
And in the 14 cities that have seen a drop in student numbers, including Bath, Reading and Nottingham, the number of rental listings fell but rents still increased by more than 7%.
Savills says that the solution is to increase the supply of PBSA beds or reduce student demand.
University-age population set to grow over the next 10 years
It says that with the university-age population set to grow over the next 10 years, there needs to be a large drop in the participation rate of those wanting to go to university.
Indeed, Savills says that the student intake should drop to the same level it was before the pandemic.
The real estate firm also says that more universities need to consider undertaking agreements with landlords in the private rented sector so they can meet their student housing needs.
And it’s this that is creating an obvious opportunity for investors because they will be able to provide a product that is attractive to domestic students at a price point to enjoy good returns.
Also, since the UK’s higher education sector has a global reach, it’s important that students be accommodated close to their chosen university so they can enjoy the university experience and the student accommodation sector will retain its favourable reputation.
‘There are good opportunities for investors to enter it’
Simon Thompson, the managing director of Accommodation for Students, said: “It’s interesting that Savills has taken the time to research the sector and found that there are good opportunities for investors to enter it.
“However, as we keep saying, there are good opportunities for student landlords offering quality accommodation and with strong demand in the near future means that there are good returns to be enjoyed.”
He added: “It’s also worth noting that the imbalance between the number of student accommodation providers and demand from students will also become worse should the government introduce its rent reform ideas that will see private student accommodation moving to periodic tenancies.”
Thousands of students are suing their university
Nearly 90,000 students have joined a joint claim to sue their universities in a bid to get some of their tuition fees refunded because of the disruption they endured during Covid. This could be the largest joint litigation seen in the UK and focuses on those students who signed up for courses between 2020 and 2022. The people organising the legal bid say they deserve to be compensated because they received a substantially less valuable service than they had paid for.
Students slam university bid to increase rents
Students have slammed a bid by the University of Glasgow to hike student accommodation rents by 9.5%. The plans have been described as outrageous by the Students Representative Council (SRC). The council says that university chiefs need to consider a smaller rise or a rent freeze because of the cost-of-living crisis. A university spokesperson says that the proposed increase was below the rate of inflation. Students also say that the university has not consulted with them, and they first heard about the plans in January. The increase could, the SRC says, mean some students will be spending 87% of their student loan on their rent.
