An interesting article of the Property Wire on July 16th, 2013 reveals that the student housing market in the UK has been resilient and stable investment during the downturn and that is forecast to continue, according to a new analysis from international real estate advisor Savills.
Growth is expected to continue despite pressures on student demand
due to increased tuition fees and threats to international student
numbers through tougher visa controls.
Following weaker rents
during the 2012/2013 academic year, Savills forecasts total returns of
9.3% for the 2013/2014 year with static blended net initial yields at
6.3% and rental growth of 3% due to improving demand and restricted
supply coming through.
‘We are confident that student housing will
continue to prove a counter-cyclical investment, but the market is not
without its risks. Investors should consider investments on an
institution by institution basis, remaining mindful of the city supply
where there are multiple universities,’ said Marcus Roberts, Savills
head of student investment.
‘Some cities will have reached
maturation relative to student numbers, while some universities will be
more susceptible mid term to fee increases. Over and above demand as
defined by student numbers, university rankings are normally the first
reference point for prospective students and a good indicator of
investment risk,’ he added.
Applicant numbers are an early
indication of student demand and while the increase in tuition fees up
to a maximum of £9,000 per annum triggered a 6.7% fall in applications
for the current academic year, numbers are up by 2.7% for the 2013/2014
year.
Demand from outside Europe has continued to grow
particularly from the Far East which has seen average annual growth of
8.5% over the last six years. Figures released by UCAS show a 9.9%
increase in number of students applying to UK universities from China
and a 19.3% rise on those from India, suggesting that while recent
student visa reforms have tackled abuse, students are not put off
studying in the UK’s universities.
Savills points out that the
ability to attract the most able, internationally mobile students is
vitally important to the standing of the UK’s best universities on a
world stage. Any government policy targeting a reduction in net
immigration should take care to differentiate between those students
attending accredited universities and those attending less well
regulated educational establishments.
The Savills Student City
Monitor is a combined measure of demand, student demographic, university
academic rank and financial health, affordability of local rental
market and the supply of purpose built accommodation.
It
ranks universities from ‘First’ through to ‘Pass’ and just nine make
the top grade, all well known for academic achievement, strong
international demand or undersupplied and relatively unaffordable local
housing markets. The top nine are Bath, Bristol, Brighton, Cambridge,
Cardiff, Edinburgh, London, Oxford and St Andrews.
The report says
that London market in particular will present opportunities based on
the affordability measure, with private rents forecast to continue to
rise, further stretching affordability and driving demand.
The
Community Infrastructure Levy, which is effectively a tax on new
development, is an emerging risk for the student sector. Across the UK,
Developers of student housing have not typically had to provide
affordable housing under Section 106 agreements, however this is
creeping in within London which is causing viability issues. However,
potential CIL costs as charged per square metre of new floor space in
addition to potential S106 contributions, will make many new schemes
unviable.
‘The provision of good quality, well managed
accommodation is key to an institution’s ability to attract top class
students. We are now working closely with developers and house builders
across the country in an effort to ensure that emerging CIL rates do not
impact significantly on the viability of the student housing market,’
added Roberts.
Article by: Property Wire
Article Source: http://www.propertywire.com/news/europe/uk-student-property-investment-201307168007.html
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