A recent report by Savills has shown that the UK student property market performed well in 2016, even in the face of uncertainty surrounding Brexit
Fears surrounding the performance of the UK student property market following last year’s Brexit vote were unfounded, according to a recent report by Savills. Although activity was down slightly on 2015, investors still traded 68,000 student beds worth £4.5bn in 2016, with volumes 54% higher than the average for the last 5 years. Many investors waited until the outcome of the 23 June referendum before making their move, leading to a flurry of activity in the second half of the year. The fall in Sterling’s value in the wake of the ‘leave’ vote has made the UK student buy to let market more attractive to overseas investors, with Singapore the biggest mover over the course of the year.
Rather than damage performance, as many analysts had forecast, the Brexit vote intensified activity in the UK student property market and demonstrated the resilience of the sector. The report also highlighted how the demand for student housing in the UK has outgrown supply. Analysts believe that the market will continue to be driven by bulk purchases, as investors seek to shore up their positions and acquire additional scale.
Appealing to the Far East
The UK’s student property market has become a global asset class, attracting billions in investment from some of the world’s richest individuals and sovereign wealth funds. Demand is so strong that it was standing-room only for some prospective buyers at a recent investment conference in London. One of the biggest overseas investors is Singapore-based fund Mapletree, which acquired over 6,000 beds last year.
In recent comments, Hiew Yoon Khong, Chief Executive of Mapletree provided insight as to why the asset class holds such appeal to overseas investors, telling reporters: “Student accommodation is a big business and relatively low risk.” According to Savills, the second largest source of capital into UK student housing in 2016 came from North America, with over £1.3bn worth of investment. The bulk of which came from two Canadian investors: Brookfield SRE and CPPIB.
As the student buy to let property market has grown exponentially, so the quality of the accommodation has risen. Nowadays student rooms are more akin to corporate apartments, with communal facilities to match. A key part of our portfolio at RW Invest is One Islington Plaza in Liverpool, where flat-screen TVs and high-speed broadband come as standard in the rooms. A cinema room, gymnasium and games room provide students the chance to relax away from their studies, reflecting new standards that many now demand. Research from Knight Frank shows that over one-fifth of students are willing to pay more than £160 per week for the right facilities. New possibilities are being created within the market, as developers compete for the attention of an increasingly discerning client base. Overseas students, attracted by a more lifestyle-oriented academic environment, are a big part of the equation.
Appealing to students means appealing to buy to let investors, who will in turn enjoy greater rental returns, and a UK student property market that has demonstrated it can weather the toughest of times.
According the 2016-17 QS World University Rankings, Manchester is second only to Edinburgh and London as the UK’s most popular university destination. It ranked the city joint-23rd in the world with Barcelona, and most impressive of all, the University of Manchester 29th worldwide.
Manchester is home to a diverse range of famous attractions, including The Lowry theatre, the National Football Museum and the Manchester Art Gallery. The presence of the BBC, along with the UK’s fastest-growing startup scene at MediaCityUK, provides huge appeal to students looking to get ahead when they graduate. These are just some of the reasons why developers continue to invest in the city, and why the Manchester student buy to let market is one of the most competitive in the country.
… and Liverpool
There is an estimated 54,000 students in Liverpool, making it one of the UK’s most popular places to study. Aside from an outstanding choice of universities, students choose the city for its vibrant social scene, low cost of living and rich cultural heritage. Student accommodation is in particularly high demand in the Knowledge Quarter Liverpool. The city’s academic district combines leading names from education, health, science and technology with some of the most famous attractions. It’s here that you’ll find the RIBA award-winning Everyman Theatre, the Liverpool Philharmonic, the historic Philharmonic pub and the city’s two cathedrals. As well as a host of great bars and restaurants.
Then there’s Bold Street, which may as well have been conceived with the city’s student population in mind. Lined with independent bars, restaurants and vintage stores, Bold Street offers a fitting contrast to the modern architecture and high-street brands of Liverpool ONE a few blocks down. In fact, wherever you go in Liverpool, culture and history are waiting to greet you. The Tate Liverpool, the Walker Art Gallery, the Museum of Liverpool and the Beatles Story, all contribute to an environment in which students thrive, and the reason why demand for buy to let student accommodation in Liverpool is out-stripping supply.
By Michael Gledhill – 4th August 2017
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