UK's student accommodation market booms with growing student numbers

The UK's student accommodation market is thriving, fuelled by a surge in student enrolment and changing preferences, an analysis reveals.

The study by Colliers International shows the number of undergraduate applicants to UK universities rose by 4% between 2020 and 2023.

This trend is even more pronounced for international students, with a 26% rise since 2014.

However, more than 84% of these international applicants come from non-EU countries, highlighting the global appeal of the UK's universities.

'Growth, diversity, and shifting preferences'

Sara Lindblom, a research analyst at the real estate firm, said: "Delving into the key data points from recent years unveils a narrative of growth, diversity, and shifting preferences that are shaping the market.

"As the landscape of higher education evolves, so too does the demand for student accommodation in the UK."

Colliers says there were 752,025 undergraduate applicants in the 2023 cycle, with UK undergraduate applicants growing by 4.5% between 2014 to 2023.

Over the same period, 85% of international applications came from non-EU countries.

The number of postgraduate students

In addition, Colliers says the number of postgraduate students has also rocketed by 52% between 2015 and 2022.

This trend, the firm suggests, reflects a growing desire among students to pursue longer academic journeys.

Indian postgraduate numbers grew by nearly 7.7 times between the academic years of 2014/15-2021/22, totalling 90,035 students.

Chinese postgraduates increased by 78% in the same period, totalling 38,930 students.

'Block dependents from accompanying international students'

Ms Lindblom said: "The UK government's decision to block dependents from accompanying international students as of January 2024 is likely to impact university incomes.

"Additionally, domestic undergraduate fees being frozen while operational costs rise, puts financial pressure on universities."

She adds: "Considering these challenges, universities are diversifying their income streams, mitigating volatility caused by fee income trends and policies.

"Income from intellectual property, for instance, increased by 85% between 2015 and 2023."

Demand for purpose-built student accommodation

Colliers also highlight that the demand for purpose-built student accommodation (PBSA) is being driven by these demographic shifts, combined with rising costs in the wider private rented sector (PRS).

With more students enrolled for longer periods, the need for quality, affordable accommodation is on the rise.

That also means the difference in PBSA and PRS rents is narrowing, the firm says.

Need for quality accommodation is increasing

Ms Lindblom said: "With more students enrolled in higher education for longer, the need for quality accommodation is increasing.

"Although transaction activity in PBSA has cooled off due to economic uncertainties and high debt costs, investor sentiment is expected to rebound with shifting interest rates and more affordable capital costs on the horizon."

She also says that the evolving preferences of students, along with global economic trends, look set to shape the future of the UK's student accommodation market.

That means a slowing supply of student properties and increasing demand will push up rents - and create opportunities for investors and developers.

The report also stresses a 'clear need' for more student accommodation to be developed and help bring rent rises under control.

'Landlords will know that demand is increasing'

Simon Thompson, the managing director of Accommodation for Students, said: "Most student landlords will know that demand is increasing.

"Though the number of overseas postgraduate students is surprising and shows how good UK universities are."

He added: "And while demand is growing, it's a shame that the government can't help the student accommodation sector deliver quality homes to meet this demand.

"Retaining fixed term tenancies and tax incentives will certainly help and create more supply to help control student rent rises."