How is Brexit impacting the student accommodation market?
The draw of the UK
In the six years to 2013/14, the proportion of non-UK students living in purpose-built accommodation rose from 4.3% to 10.8%. And although the number of applications has dropped slightly in the last year, there is still an opportunity for numbers to rise in the future, as long as student numbers don’t get caught in cross fire of immigration limits. The reality is that a UK-obtained degree is still held in high regard across much of the world and the depreciation of sterling has made both tuition fees and living costs more attractive.
Wealthy individuals and sovereign funds, coming mainly from Asia, seem to be virtually ignoring Brexit and focusing on what appears to be a solid and increasing demand for the new-build units that offer students an exceptional standard of living. The Guardian reported in May that it was standing room only at the Student Housing 2017 conference in London, with the organiser saying that student housing is now a “truly global asset class”.
Far from the ‘old days’ of cheap and tatty digs, rents for increasingly luxurious student accommodation are keeping up with and sometimes even exceeding levels paid by working professionals and other tenants at the higher end of the market.
As far as the students themselves are concerned, rather than living up to the ‘party hard’ image, the vast majority of students today seem to be very conscientious and want to live somewhere modern, well-equipped, comfortable and secure. This new generation of units are either en-suite bedrooms or studio apartments and many have hotel-style facilities, including gyms, pools and concierge services. In terms of location, they’re often just a short walk or bus ride into the city centre and close to shops, restaurants and other amenities.
The benefit to investors of these new builds being of such a high standard is that they have broad appeal and flexibility of purpose, which greatly reduces the investment risk. If EU students do leave the UK, either through choice or because Brexit negotiations force them to, the demand for accommodation will almost certainly drop. Scottish universities are most vulnerable, because foreign nationals are attracted there by the lack of tuition fees, followed by certain university cities in England - including Oxford, Manchester and Southampton - that are currently popular with EU students. In that case, the accommodation, if not exclusively for student lets, could be marketed for sale or rent to young professionals or if allowed, even turned into hotel rooms and apartments.