Affordability

With increasing competition in the private rented sector (PRS) from young professionals, and families priced out of the owner-occupier market, rental growth has been strong in many markets.

This is particularly true in London where rents have increased by 20% over the last three years and the average rent for a one bed property is £1,500 per month while a three bed property is a relative bargain at only £1,050 per month per bed.

The premium for one bedroom properties is found consistently across all markets with an average premium of 110% on a per bed basis relative to three bed properties but this ranges from 67% in Bristol to 172% in Swansea.

The trend in rental levels follow a rough north-south trend with those locations close to London generally seeing higher rental levels due to increased wider market competition.

Immigration reform

The strength of international demand is important for both the continued financial health of the university sector and also the wider economy. However, with government policy targeting a reduction in net migration to the UK and the reason most stated for inmigration being ‘formal study’, there is a lot of pressure on the university sector over the quality of their students (the Home Office ban on recruitment of non-EU students at London Metropolitan University being the biggest example, although this has now been lifted).

While there may be issues with the monitoring of international students at some institutions, the chart below shows how small the increase in overseas students at universities has been compared to the overall scale of immigration for formal study. Therefore, any government policy aiming to reduce net immigration should take care to differentiate between those students attending accredited universities and those attending less well regulated educational establishments.

Supply

The average university town houses 26% of its students in halls of residence (university or privately operated), 38% in their own or parental home and the remaining 26% in the private rented sector.

However, this average hides a wider variation in different mixes of provision from the traditional collegiate universities of Oxbridge to the universities catering to local demand with large numbers of students still living at home to those that rely on the private rented sector to house a significant proportion of their students.

The opportunities for student accommodation providers will likely be focused in those markets with a high dependence on the private rented sector and low levels of students still living at home.

Towns with high existing provision of halls of residence may still offer opportunities, particularly around the newer universities into those towns.

We have also measured the difference in numbers of students between 2010-11 and 2011-12 by type of hall to identify those locations that have seen a decline in student numbers and hence a possible excess capacity of halls of residence.

These locations are towards the lower end of the university rankings and so, although there may be unique reasons for this (stock refurbishment etc) they do raise some concerns over the investment potential for these markets.

Taken from
Spotlight: UK Student Housing