Student accommodation prices remain resilient.
As we enter 2022, many investors are considering where to put their money to give themselves the best chance of earning reliable income. The property market has proven itself over many years to be a better option than either stocks and shares or saving with a bank, but what type of property should you buy?
Residential property investment is the most popular property asset class, but the Purpose-Built Student Accommodation (PBSA) market is an alternative that should be of interest to any investor in 2022.
While PBSA has many attractive features, perhaps the most important for investors is its history of resilience. It was one of the few asset classes to weather the 2008 financial crisis with minimal ill effects, and all indications are that it has repeated the trick during the pandemic. Indeed, 2008 showed us that during downturns, student numbers often increase as many who would otherwise have not gone to university choose to go and develop their skills further.
The Covid-19 pandemic saw a temporary shift to online learning for many students, but they are now returning to classrooms as the standard of education received in person cannot be replicated remotely.
Due to this, occupancy rates bounced back strongly in 2021, and the average sector-wide average now stands at more than 95% according to the latest Student Accommodation Survey from Knight Frank and UCAS. This has been driven by greater demand from both UK-based students and overseas students, another key factor in the resilience of the sector.
In the case of international students, there was some speculation that the number in the UK may fall – something of concern for investors as overseas students are generally more inclined to pay higher rents for the best PBSA close to universities and city centres. However, the reality is that interest from overseas students remains strong and is in fact higher than pre-Covid levels.
Furthermore, Times Higher Education reports that the government has stated a goal of attracting 600,000 international students to the UK every year by 2030. This is approximately 200,000 more annually than we currently see, and will see competition for PBSA reach new highs as only two of the UK’s top university towns have enough accommodation for the expected number of students according to EG.
Another factor in the growing competition for PBSA is the simple fact that unites both UK-based and international students in the Knight Frank/UCAS Survey of 70,000 students: the most important factor is value for money. This means that traditional university-owned halls of residence with no amenities, sub-standard maintenance and outdated facilities are simply not as desirable compared to PBSA buildings which offer a substantially better quality of life.
It is solid fundamentals like this which explain the ongoing resilience of the PBSA sector, and underline why it is such an attractive prospect for investors.
The increasing popularity of PBSA, and the lack of supply against the growing demand, has led to estimates that the sector will be worth as much as £72bn by the end of 2022. This was driven by more than £3bn of transactions in 2021 as recorded by Savills, a total that is likely to be significantly outstripped in 2022.
Merelina Sykes, Joint Head of Student Property at Knight Frank, commented: “A pick-up in deal volumes is a positive sign for the market, suggesting investors […] have confidence in the sector’s ability to deliver long-term, stable income streams.
“Throughout the pandemic, yields have remained stable, due in part to rental guarantees but also ongoing confidence and the view that pandemic disruption is short-term. The weight of capital now targeting PBSA has increased and it is our expectation that student property will remain a key target for both institutional and private equity in 2022 and beyond.”
Sykes added: “Global investors continue to acquire PBSA assets in the UK, fundamentally underpinned by the UK’s world renowned higher education system. The asset class offers a stable income stream, with strong year-on-year rental growth prospects. When compared to more mature, traditional asset classes, PBSA continues to stand out.”
Richard Valentine-Selsey of Savills agrees, stating: “In contrast to many other real estate sectors, 2021 [saw] significant confidence return to the UK’s PBSA sector.”
This is an ideal time to consider a PBSA investment that offers everything students want in a strong university area. For example, Poulsen House, which lies a nine-minute walk from the University of Staffordshire (approx.. 13,000 students) and a short drive from Keele University (approx.. 10,000 students).
This is a fully-operational student accommodation development with a strong track record of student satisfaction and a 100% occupancy rate. A two-year rental assurance provided for the first 40 investors represents an attractive and immediate income stream for investors.
Additionally, it is fully hands-off and managed by Greenpad, the university’s own management company, and it is their sole management property – guaranteeing a high level of focus and maximum occupancy each year.
With properties available from just £62,950 per unit, this is an opportunity not to be missed. For more information about the UK PBSA market and investing in Poulsen House, please get in touch with our team today by clicking here.