The UK student accommodation has the highest rate in all of Europe, with as much as 27% of students accommodated. While the UK housing market is experiencing cool down, investors seem to look at purpose-built student accommodations (PBSA) as a lucrative solution for their real estate investments. It has become a big business in the UK. The UK PBSA has become a mature investment market, with a current valuation of £53 billion.
For the academic year 2019/20, PBSA constructions increased by 25%, and it will continue until 2020/21. This increase in development is due to the UK student population boom. There will be an increase in the number of young people who will enter college. These students will look for student housing that will suit their budget and lifestyle.
Today, there is an overwhelming demand for PBSAs in the UK. Based on the number of full-time students, it will outweigh the existing PBSA bed spaces by 3:1. In the UK, almost seven out of 10 PBSAs are university-owned. However, they largely depend on the private sector to cater to the growing demand.
Many of the investors and developers are looking to invest in UK student accommodation. Areas of high interest include the Midlands, south of England, and Northern Ireland. There is also a notable decrease in interest in the Central London property market because it is significantly affected by uncertainties brought by Brexit.
Manchester Headlining Student Accommodation Growth
Much of the increase in student housing construction is evident in places such as Birmingham, Leeds, and Manchester. Manchester is among the UK cities with a growing student population that has modest delivery pipelines. For this reason, Manchester is significantly outperforming the broader market, mainly London.
Manchester has four universities and 14 higher education colleges surrounding the city. This strategic location placed them to be at the centre of the demand for UK student accommodations. Manchester, along with Edinburgh and Birmingham, has historically low numbers of PBSA developments, making them a core investment opportunity for astute investors.
Market Growth and Foreign Investments
In a report released by Savills, student accommodation investments in the UK will increase by 17% this year. This growth will see an increase in the number of purpose-built student accommodations.
Generally, most of the investments come from foreign investors who see potential in the UK market. Foreign investment market share totalled 65% last year, with Singapore investors putting in much money. Mapletree and GIC have a combined investment of £1.2 billion on the UK student housing market since 2016. Savills also reported that most of the foreign capital in the UK student housing market come mainly from Asia, as many believe that UK higher education is a tangible asset for them.
To conclude, the UK housing market may have slowed down due to the impending no-deal Brexit, but some sectors continue to give the best ROI, and one of them is student housing accommodations. Many of the investors are avoiding the London property market, and are considering regional cities like Manchester where there is a high demand and still low supply of PBSAs.