Savills new report on Spain’s student housing market finds that a combination of high student hall occupancy rates, a fall in development completions and rising student registrations highlights a growing supply/demand imbalance in the emerging real estate sector.

The international real estate advisor notes that the majority of student halls in the main university towns across Spain have 100% occupancy rates during the academic year (October to June). Furthermore, over the last three years the report records an 80% drop in student housing development completions, while over the same period new student registrations have increased by almost 20%. With student housing stock due to increase by just 1.3% in the current academic year (2011-12) placing more pressure on supply, Savills identifies a window of opportunity for developers and investors.

The firm notes that 1.45 million students registered in Spanish universities in the academic year of 2010-11, including 48,000 foreign students, and expects registrations to have increased by 10% in the current academic year (2011-12). Gema de la Fuente, research director at Savills Spain, says: “Spanish universities have seen student registrations rise by an annual average of 6.6% since 2008, marking the highest average annual rise in Europe. With a constrained development pipeline this has generated a huge imbalance, creating opportunities for developers and investors.”

When assessing rental levels for student accommodation, Savills finds a significant variation depending on region and the type of room with public halls usually cheaper than private halls. The average monthly rent in public halls for full board stood at approximately €650, or €950 per month in private halls for the academic year 2010-2011. In the same period the price to rent a room in wider residential markets in Spain’s main university towns was widely reported as averaging at €219 per month, but the level was higher in main cities.

In terms of investment into student housing in Spain, Savills notes that it is still very much an emerging sector that holds good long-term opportunities.  The firm expects that prime yields, which it currently estimates at between 6.75% and 7.0%, will remain attractive compared to other market sectors.

Marcus Roberts, Head of Savills Student Investment, comments: “The student housing market, already an established alternative asset in the UK, is also becoming a niche sector for European investors. With some uncertainty surrounding the fundamentals of traditional commercial property sectors, investors are looking for alternatives in Europe. With a sustained demand and student registrations consistently rising year on year, student accommodation could be seen as such an alternative.”

View full Spanish Student Housing research report (PDF, 1.46MB)