Student accommodation investment to soar as international investors pile in
Brexit fears appear to have had little impact on investment in student accommodation in the UK with levels increasing by 17pc this year, according to Savills.
Applications for places have fallen by 5pc from students in Britain and by 7pc from those in the European Union. However, £5.3bn is expected to be sunk into purpose-built student accommodation in 2017, compared to £4.5bn last year and a record £6bn in 2015.
The sector was particularly boosted by international investors, who increased their market share to 64pc last year from 35pc in 2015.
The referendum appeared to have little impact on the investment flows, and the value of trade was in fact higher in the six months after the referendum than before, with £2.1bn flowing in during the second half of 2016, compared to £1.9bn before.
This asset class is particularly favoured by investors from the Far East. The jump in international investment was due partly to the an influx of money from Singapore, such as from the country’s sovereign wealth fund GIC and real estate developer Mapletree, which spent almost £1.2bn on UK student housing between them last year.
James Hanmer of Savills said the sector was particularly popular among those in Asia because “UK higher education is tangible for them and they can get their head around it easily”.
Jacqui Daly, director of Savills’ investment research and strategy, said: “Their continued investment in 2016 is a massive vote of confidence in the sector.”
Because of the yearly tenancies it usually has strong rental growth year-on-year, and it is “countercyclical, making it a good hedge against other risks”, she said.
Rents in the sector have risen by an average of 2.7pc, according to Cushman & Wakefield.
There are worries that foreign students will not be separated from UK immigration targets, which would be a blow to the sector. Savills has calculated that if students are exempt numbers will rise 6pc.
Savills has calculated that if students are removed from immigration targets, international student numbers will rise 6pc.
The report highlighted Exeter, Guildford and Leeds as good areas to invest in, due to low levels of supply and the universities’ success in attracting new students. Liverpool slipped down in the rankings due to worries of oversupply.
The average weekly rent of a room in a student accommodation block is £126, according to Knight Frank, rising to £180 in Oxford and £200 in Guildford.
Source: thetelegraph.co.uk | Originally published on: 14/05/2017 | See the original post on thetelegraph.co.uk