Spotlight on UK Student Housing
New research by Savills World Research has found that investors are continuing to pay premiums to aggregate greater student bed numbers and despite a difficult set of circumstances, the UK student housing market performed well in 2016.
Investors traded 68,000 student beds worth £4.5bn last year in the face of severe market constraints; it is expected that in 2017 this should rise to 75,000 beds, worth an estimated value of £5.3bn. This indicates a rise of 17% year on year.
The report also found that investors are willing to pay premiums for larger portfolios, driven by their need to allocate their investment capital and build scale quickly in the current market.
With the General Election looming, there is an opportunity for policy to become more welcoming to international students. If students are removed from migration targets, growth of overseas students in the UK could exceed worldwide growth of 6% per year.
In a highly competitive market, developers will have to be careful when selecting sites. Development prospects are stronger this year in prime markets such as Exeter, Guildford and Leeds, mainly because of strong demand characteristics, high occupancy levels, strong rents and excellent prospects for rental growth.
Interestingly, the Far East leads the way in UK student investment. Last year, UK student housing continued its evolution into a global investment market. The proportion of international investment flowing into the market has almost doubled in the past two years. Foreign investment grew from 35% of transactions in 2014 to 64% in 2016. There was a huge increase in Singaporean investment in 2016, up to almost £1.2 billion from just £35 million the year before.