Student Housing Market
The student housing sector has received some widespread media coverage in the last four months with two stories in particular grabbing headlines; homeless students and international visas.
International student visas
Perhaps the most significant piece of news for the market this quarter was the Prime Minister’s September announcement to allow international students to stay in the UK for two years after graduating. This policy would reverse the decision made in 2012, by Theresa May (then Home Secretary), to limit this period to four months.
There are currently 450,000 international students studying in the UK generating an estimated economic value of £20Bn per year. The student housing sector unequivocally values both the economic and cultural contribution international students provide, and it is fair to say the policy U-turn has been met with open arms, and is set to drive further confidence culminating in enhanced investment in the sector. This follows a growing feeling amongst investors that the lack of post-study work opportunities was putting the UK at a competitive disadvantage. This manifested in growing concerns about the future of international student numbers in the UK, which has a direct impact on the student housing market. This news however, is expected to stimulate growth in numbers thus providing a positive economic driver for the sector.
At the start of the academic year the private PBSA student housing market was subjected to various media articles. According to research conducted by the BBC, 22 new student housing developments across the country were hampered by delays leading to the unfortunate displacement of students into temporary housing for the start of the 19/20 AY. Students in Lincoln, Bristol, Portsmouth, Durham and Swansea amongst other locations suffered and in some instances are still living in hotels, away from their peers.
Given the vulnerability of students, particularly those entering a new city for the first time, it was no surprise to see universities minister Chris Skidmore wading in on the topic. As things stand, higher education regulator, the Office for Students, has no powers to regulate private housing providers but comments made by Mr Skidmore suggest the issue will not be brushed under the carpet. At a time when student wellbeing is rightly at the forefront of market commentary, calls for better regulation of private operators will likely strengthen. Quite where or how such power will be determined, we should expect to be debated for the coming months.
450,000 international students studying in the UK generating an estimated economic value of £20Bn per year
Deal flow remains buoyant and appetite is strong but as we alluded to in our Q2 review, the market is developing a polarisation.
This quarter Mapletree’s £96M acquisition of 1127 beds in Coventry grabbed the limelight, and there continues to be a series of off-market deals between developers and owner-operators. The Competition and Markets Authority is yet to sign off Unite’s proposed acquisition of Liberty Living and is currently considering comments made by the wider industry. A decision is expected in Q4.
Whilst student housing appears defensive in the face of uncertainties and has performed well, there is a feeling the sector has dampened in the last month as a decision date moves closer. Certainly any fundraising exercises have been a challenge where further sector investment i.e. funds not already committed have been trickier to unlock. This does not appear to be a default in the sector, rather a natural wish to await a clearer political outlook.
Finally, Thomas Hale’s article in the Financial Times is worthy of note, not least because it centres on three dreaded property industry ‘B words’: Boom, Bubble and Burst. There are towns and cities throughout the UK that will see some negative press in the coming months and years, but this should be expected and should not come as a surprise. This particular article picks up on troubled Plymouth and highlights issues of ‘over-supply’. It is the product of a City with large swathes of cheap land, a Council desperate for inward investment and falling student numbers. The experience of Plymouth should not however taint the wider market where sentiment is strong. The case study does however set the tone for a polarising market, where some higher education destinations will fall behind stronger destinations for new student housing investment in the months ahead.
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