Growth in higher education enrolment globally has underpinned demand for student accommodation. In many cases it has significantly outpaced supply. Such is the imbalance that even in markets where student numbers are stagnant, opportunities do exist.

The higher education sector saw a boost to student numbers during the global economic downturn as a weaker world job market pushed more people into higher education.

Between the 2006/07 and 2010/11 academic years, student enrolment increased by an average 12% across the top seven internationally significant student markets. Since then, uneven economic recovery has brought divergent performance. Some markets have sustained enrolment growth, while others have seen numbers plateau or decline.

In response to rising tuition fees and demographic change, the large US and UK student markets have seen a fall in numbers from a 2010/11 peak (in the UK, driven by a decline in part-time students), as have Spain, Portugal and Italy.

Conversely, some smaller markets such as Austria and Ireland have enjoyed a very strong run of growth throughout the period, up 44% and 42% in the last seven years respectively. Austria has been buoyed by low tuition fees and European appeal, while Ireland has benefited from favourable demographics.

In the southern hemisphere, Australia has seen student numbers surge, benefiting from strong inbound Asian demand and fast-growing domestic population. A comparatively large market of 1.4 million students, total student numbers are up 37% in the last eight years.

^{Source: Savills World Research}

International student trends

A growing, internationally-mobile student population has fuelled demand for purpose-built student accommodation in the markets that have been the biggest recipients of these students to date. Private student housing operators provide a one-stop-shop for secure, quality accommodation so have found themselves with a commercial edge in this sub-sector. Many of them have actively tailored their offer to appeal to this market. Understanding trends among this group is therefore important to the sector.

China is by far the world’s largest outbound student market, for which the US, followed by Australia, Japan and the UK are the biggest recipients. There were 712,000 students from China studying abroad in 2013, according to the latest available data from UNESCO. China’s outbound student population grew by 479% between 1999 and 2003 as its middle class expanded and the country opened up to the world. India and Germany follow some way behind, with 181,900 and 119,100.

South Korea, which was the second largest outbound market in 1999, now stands fourth with 116,900 internationally mobile students. Further decline in outbound student numbers may follow, with South Korea’s population aged 15-24 set to fall by 30% in the next decade (the US, Japan and Australia are currently its top destinations).

Investors may do well to watch for countries and cities that benefit from a diverse international demand base, or particular fast-growing outbound markets. Of the largest student-exporting countries, Nigeria (top destination: UK) and Saudi Arabia (top destination: US) are set to see the strongest growth in higher education aged populations in the next decade, at 35% and 20% respectively.

^{Source: UNESCO, Oxford Economics}

Attracting international students

International students contribute to a local economy as well as the bottom line and diversity of a university. International students often pay higher fees, spend more on both accommodation and living, and bring new insights and cultural perspectives to a country.

This is particularly the case if they stay on to work in the country after graduation and take their newly acquired, but overseas paid-for, skills into local businesses and the economy. More institutions, and countries, are recognising this value and are targeting overseas students, especially those that face a shrinking domestic university-age demographic.

Currently, the US and UK attract the lion’s share of international students, accounting for 19% and 10% of all globally mobile students respectively. Australia, France and Germany round off the top five, together hosting a further 17%.

In a bid to tap into lucrative international markets, European institutions are actively increasing their international appeal. Alignment to the bachelor system, greater commercialisation, and more courses taught in English are all helping to raise profiles. The international language of business English is of importance to prospective employers the world over, so tuition in English carries significant weight with prospective students.

The Netherlands was the first European country to move towards English language tuition at scale, and now boasts the largest number of enrolled students on English taught programmes (ETPs) (Figure 7), accounting for 57,000, or 7.2% of the total student body. UK students can apply via UCAS, making it especially accessible to the British. In Denmark, ETP students account for 12.4% of the student body.

Germany, with 30,500 students studying on ETPs stands fourth, accounting for just 1% of its total student population. Such a low proportion suggests there is significant room for growth in the expansion of such programmes here. France and Italy are two other large student countries that may offer potential for growth in the number of ETPs and in turn further their attractiveness to international students.

^{Source: Wächter and Maiworm}

Demand drivers: the cost of living and study

The amount that students pay for accommodation away from home can vary widely across the world, as does tuition and general cost of living.

We have combined the costs of living, accommodation and tuition across key student cities to assess how they compare.

US cities, led by Boston, are the most expensive. Students in high ranking US institutions can expect to pay between $3,000 and $4,000 per month in tuition, and a further $1,000 to $1,600 for private, purpose-built accommodation, on top of monthly living costs.

London, Sydney and Melbourne follow, given high fees for international students ($2,000 to $2,400 per month) and comparatively high accommodation costs.

Based on purpose-built student accommodation alone, London is the most expensive city ($1,600 per month), just ahead of New York ($1,580 per month). It is no coincidence that these are two of the most expensive cities in the world in which to rent open market property too.

By contrast, mainland European cities stand apart for their affordability. Living and studying in Berlin and Munich is of comparable cost to studying in Beijing and Shanghai – but with even lower tuition fees. Both domestic and international students pay a nominal $20 and $30 a month in ‘semester contributions’, cost of living is low, and private PBSH usually costs less than $650 per month. The opportunity to further attract international students here is significant.

While tuition is the largest single cost for international students in over two thirds of the cities analysed, for domestic students (outside the US), accommodation costs are the greater component. Madrid, for example, drops from 8th to 12th position when domestic rather than international (non-EU) tuition fees are included in the calculation. With accommodation looming large as the biggest cost, domestic students are more cost-sensitive than their international counterparts.

Certain cities have a clear affordability advantage, but the reputation of an institution, the appeal of a city, the job prospects after graduation and the language in which a course is taught will often play a greater part in a student’s university-choosing process.

For this reason we continue to see large proportions of students choosing to study in more traditional, albeit expensive, locations. However, the more affordable markets offer huge potential when it comes to attracting mobile students seeking lower cost education.

^{*Non EU international student/domestic student on non-specialist STEM undergraduate degree (e.g. mathematics) course at a top institution, residing in purpose built student accommodation.}

^{Source: Savills World Research}

Demand drivers: university rankings

University rankings are an important starting point for prospective students choosing a place to study. This is particularly the case for those looking to study abroad, who may be less familiar with the local university system. Ranked institutions enjoy a higher profile and may expect more applications, sustained student numbers and, in turn, a robust demand base for student housing providers.

The US and UK have historically dominated these rankings, but other countries are now making an impact. With greater commercial focus, more courses taught in English and alignment to the bachelor system, European countries are on the rise. France, for example, has seen the number of institutions in the QS Top 700 increase from 19 to 26 since 2012 (Figure 9). Germany has the third most ranked institutions globally. Spain rounds off the global top 10.

Outside Europe, China has overtaken Japan to take 5th position for the number of ranked institutions. Australia remains dominant with 30 in the top 700, up from 25 in 2012.

^{Source: QS, Savills World Research}