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.
