Cities with more than one university could see a swarm of mergers and acquisitions as more commercially minded institutions take over their academically minded counterparts.
This could bring a boom for private student landlords as the surviving universities will attract more students.
This was one scenario played out in a state of student letting debate among developers, lenders, and academics in Birmingham.
Andy Foote, founder and managing director of property developer William Lewis, believes cities with two or more universities face financial challenges from government spending cuts.
“You often find that one university has a more commercial mindset, whilst the second is more academically-focused, so I wouldn’t be surprised to see mergers and acquisitions in this sector,” he said.
“We’re already seeing some universities trying to generate cash-flow by selling their halls of residence, which are really their crown jewels in asset terms. There are just over 100 universities in the UK, and about 20% have sold, or are considering selling, their accommodation.”
John Heron, managing director of specialist buy to let lender Paragon Mortgages, predicts demand for student housing will stay.
“Private landlords are the backbone of the market for student accommodation, because universities simply can not build and hold on to the halls of residence they need, but yields vary,” he said.
“In London, they might be only 4-5%, but in Birmingham, they would be more likely to be between 7 and 8%, and in some northern towns, you might get 10%.”
Overall, the meeting debated the problem of scale of investment. Around the table, the general agreement was buy to let landlords are building up portfolios of mainly two-bedroom properties when the student market requires larger properties.
The consensus was summed by Mr Foote, who said: “Unite does fine in the student market, but outside that niche, it is difficult for institutions to operate efficiently, and private landlords have huge cost advantages. Buy-to-let does not need institutional money; it needs more finance to be made available to private landlords.
”It’s difficult to see how an institutional business model would work, and how investors would put their money in, and then get their desired return, without driving rents too far north.”
