The controversial policy decision to allow universities across England to raise tuition fees to up to £9,000 per annum from the 2012 academic year has created far-reaching implications for institutions, investors and developers in Scotland, Wales and Northern Ireland. These fee changes were made in response to the Browne Review and occur alongside significant financial cuts to institutions’ budgets across the UK (see Graph 1).
The higher education sector is now experiencing rapid change and increased uncertainty; in particular, from 2012/13 the funding model will be radically different to what has gone before, as detailed in individual White Papers. From 2012, universities in Scotland, Wales and Northern Ireland will also be able to raise their fees, but their home-domiciled students will not be affected. This will increase the need for these institutions to attract inward financial investment.
While the fees do not apply to home-domiciled students, or students from within the EU (a contentious issue which was legally challenged under EU law but subsequently dismissed), there are fears that changing policy will lead to further elitism among universities. Those universities that do not charge the highest fees could appear ‘inferior’ and may struggle to attract students. This will impact on finances and accommodation demand.
Conversely, there is a risk that higher education students from the rest of the UK, and from outside of the EU, may become less numerous as they are priced out of education by fees being raised to the maximum permitted.
It is important for developers, investors and those who fund purpose-built student accommodation in Scotland, Wales and Northern Ireland to understand the changes affecting universities. The impacts will be felt not only at the level of individual institutions, but also the rental markets in those towns and cities.
Degrees of separation
Savills Research Department has analysed the main universities and HE colleges (34 in total) across Scotland, Wales and Northern Ireland, looking at the prospects for growth in purpose built student accommodation serving institutions across the three countries (see Table 1).
The analysis is based on the ability of institutions to attract and maintain positive growth of full-time, non-EU and postgraduate students respectively. Our analysis, alongside university rankings and average UCAS entry scores for new students, shows there is a distinct difference between prospects for purpose-built student accommodation at institutions across Scotland, Wales and Northern Ireland.
We have identified 24 institutions which have been classified as ‘First’ and ‘Upper-Second’ class institutions, which we believe will continue to flourish and attract students in light of recent amendments to higher education funding and policy.
These institutions already boast high proportions of full-time, non-EU and postgraduate students, combined with increasing levels of the above student groupings. They are institutions with international appeal and reputations for academic excellence. They attract and funnel the large majority of tuition fees from the rest of the UK students. The universities that fall into this category include Edinburgh, Glasgow, Cardiff, St Andrews, Aberdeen, Belfast and Stirling.
Impact of fees
Three quarters of these ‘First’ and ‘Upper-Second’ class universities have set fees of £27,000-plus for a three or four-year course. Nonetheless, demand from international and UK students for places is expected to continue to be strong for the reasons set out above. Investors, developers and funders should align themselves with the student accommodation demand connected to these universities.
More caution is needed when dealing with those universities and colleges that our analysis characterises as ‘Lower-Second’ and ‘Third’ class institutions, which could, as a result of the new way of funding higher education, find themselves locked into a downward spiral of reduced funding, negative student demand, decreasing inward investment and declining academic quality.
These are the institutions where the proportion of higher fee paying students are either declining or showing limited growth, and are relatively low down the university rankings – for example Paisley, Abertay and Ulster.
Opportunities for development and investment in purpose-built student accommodation associated with these institutions may still exist but would need to be focused on the best locations, or offer high initial yields and returns, because future growth potential is more limited.
.jpg)