UK student homes becoming hot property
The boom in the market has been underpinned by the large number of overseas students seeking higher education opportunities in the UK.
A combination of internationally recognised higher education, a structural undersupply and steady rental growth have made purpose-built student accommodation (PBSA) in the UK a popular investment option, reported the Financial Times.
International investors even consider them a safe place to park their money.
Mapletree Investments, the property arm of Singapore state investment fund Temasek Holdings, for instance, acquired a portfolio of 25 student accommodation properties in the UK for £417 million (S$704 million) this year.
The boom in PBSA has been underpinned by the large number of students flocking to higher education institutions in the UK, with 2.27 million recorded in 2014 to 2015.
However, Britain’s decision to leave the European Union (EU) means longer-term uncertainty with EU students, who account for almost seven percent of the total number of students in the UK, while the anti-immigration stance of the government casts doubts over the sector’s future.
UK Home Secretary Amber Rudd revealed this month that the government is mulling over linking student immigration to the quality of courses and colleges, as well as reducing the number of students coming from outside Europe as part of pre-Brexit immigration cuts.
Critics of more PBSA noted that if student numbers fall, the said properties will be left empty as they struggle to find other types of residents.
Despite this, interest in PBSA remains strong. The sector, which comprises both university-owned and private buildings, has an estimated combined asset value of £43 billion, said property consultancy Knight Frank, which handled the Mapletree sale.
“There are more investors in the sector now than there ever have been,” said James Pullan, Head of Student Property at Knight Frank. “It is one of the few sectors in the property world that has delivered consistent rental growth every year since the economic downturn.”
Knight Frank noted that 2015 proved to be a record year for the sector, with £5.1 billion of deals involving close to 50,000 student bedrooms. The market continued to be buoyant despite the Brexit vote, partly because the drop in the pound made UK property even more appealing to overseas investors.
Looking ahead, Knight Frank expects this year’s transactions to exceed £4 billion.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
