Purpose built student accommodation market continues to grow

Around ten years ago, the purpose-built student accommodation sector was still in its infancy, with UK students’ options typically limited to University run halls of residence or private landlords renting out HMOs (homes of multiple occupation). Fast forward to 2019 and student housing is the most mature market in the purpose-built, build-to-rent industry and according to property experts Savills, it still has the potential to grow even further – much further.

The reason for the outlook that the purpose-built student accommodation market still has room to grow, is largely down to the success of it from both an investor’s and student’s perspective. In addition, the total number of student beds being provided by the sector currently covers only one-third of the total number of full-time students in the UK.

Student accommodation in numbers 

According to recent research by Savills, after investment of £3.1 billion in 2018, there are currently 640,000 purpose-built student accommodation beds available in the UK, worth a total value of £51.2 billion.

The level of investment into the market in 2018 was below the average of £4.7 billion per year between 2015 and 2017. While this was likely down to uncertainty over Brexit and also because the market had grown aggressively, due to the total number of students in the UK being over the 1.8 million mark, there is still an opportunity for it to grow and give investors the returns they want.

Indeed, Savills estimates the entire Build-to-Rent sector, which includes student accommodation, retirement living and for private sector professionals, could grow to four times its current value of £223 billion, to £880 billion.

“Common to all these sectors is the recognition that investing in where people live has great potential for investors, particularly those seeking long term income streams,” says Lawrence Bowles, Savills research analyst.

“The fundamental demographic and economic changes supporting these sectors are difficult for investors and developers to ignore. Institutional interest will continue to grow as these asset classes mature and can increasingly demonstrate their track record,” Bowles added.

Raising standards

The value of purpose-built student accommodation comes from a variety of factors. They include:

• The modern style of living they offer.
• The extra desirable facilities that are often added.
• The comfort for investors that demand will remain strong year-on-year, provided the homes are built in the right areas.
• The increased expertise of experienced private sector purpose-built student accommodation construction firms.

In short, builders are creating homes they know students want to live in, but still at a range of prices to suit all budgets. This has made the sector an increasingly attractive one. And, with demand for UK university places from within the UK and overseas predicted to remain strong, regardless of Brexit and other political issues, it provides a lower risk, long-term investment opportunity for all kinds of investors.

Essentially, this means that students can look forward to a greater choice of high-quality purpose-built student accommodation at the university of their choice. Meanwhile, investors can expect low-risk, consistent returns. That sounds like a win-win for both parties.