We have updated our rankings of university towns and cities across the country. The ranking system considers the potential for future development in the purpose built student accommodations sector. The matrix can also be used to ascertain the investment potential of each location and a lower ranked town may still be attractive if the potential investment returns are sufficient to account for the extra risk involved.

It is based on a number of factors including current supply and demand, the private rented sector, and future supply and demand.

Current supply & demand

There is a wide variation in provision of existing supply (both private and institutional managed) across the locations we have analysed. The collegiate-based institutions (Oxbridge/Durham) typically have large provisions of purpose built accommodation. Meanwhile, some of the newer universities may have lower provision of purpose build accommodation but many students may be living in their own or their parents’ home (Bolton/Paisley). The growth of the purpose built student-housing sector has significantly added to the provision of beds in many cities such as Sheffield and Leeds. Alongside this, there has been the substantial increase in student numbers, especially from overseas, who have typically been more willing to pay premium rents.

Private Rented Sector

While the number of students living in halls of residence has increased, the majority of the growth in student numbers has been absorbed by the Private Rented Sector. Students are such key players in some local markets that the introduction of Article 4 directives limiting new HMO licences has created two-tier markets: one based on existing HMOs where the potential rent is much higher and hence capital values. And another one based on what local couples and families can pay which is typically lower. We have looked at recent rental affordability and growth to ascertain the potential to capture market share from the Private Rented Sector as per our analysis on ‘unlocking’ family homes.

Future supply & demand

As we’ve shown earlier in the report, there appears to be a flight to quality emerging in light of higher fee levels. Early indications from UCAS applications show that the fall in student numbers will probably be short-lived. However, students will increasingly weigh up the costs and benefits of attending each institution and those that are towards the bottom end of the rankings may struggle. Additionally, funding pressures will continue to press on all institutions, but those with established and internationally renowned research capabilities will be better placed than newer ones.

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Taken from
Spotlight: UK Student Housing 2014