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18 Jan, 2023

Student Accommodation Shortages Lead to High Investment Demand For PBSA

    High Investment Demand in Student Accommodation Market

    A rapidly rising student population paired with a decreasing supply of student housing has led to a significant shortfall in UK student accommodation.

    Such shortages have seen students forced to take on unsuitable living conditions, couch-surf with friends or even accept university accommodation in neighbouring cities with some University of Manchester students living in Liverpool and vice versa.

    The housing shortage is only set to expand – with data from StuRents forecasting that by 2025 there will be a shortage of around 450,000 student beds. This highlights a massive 217% increase from 2022 figures which already suggested a shortage of over 207,000 beds.

    It is no wonder then that investors are switching their focus to student accommodation as there is potential for great gains to be made owing to this growing supply-demand imbalance.

    In turn, steep competition has resulted in rental rises of up to 20% in some towns, which will be largely appealing to investors as it means more money in their pockets amidst heightened pressure for an increase in purpose-built student accommodation.

    Students inside HMO

    A Shifting Market

    Between 2018 to 2021, university-build student halls decreased by 5%, and such figures expand significantly when extended to the private sector.

    The supply of purpose-built student accommodation has too taken a significant dent – with figures showing the number of beds provided more than halving since 2019.

    On top of this, the amount of beds submitted for planning has also dropped dramatically. It has been suggested this is due to varying factors such as landlords leaving the market and moving back to renting to professionals.

    Recent regulation surrounding HMO’s (House in Multiple Occupation) has also made it more difficult to convert a residential home into a student let which has further contributed to a slump in supply.

    However, students’ own preferences have shifted to purpose-built student accommodation in recent years – contrasting the traditional HMO house share. This has placed further strain on the need for investment for purpose-built student accommodation.

    Some investors may also wish to capitalise on what has been labelled ‘turnaround’ projects – this is where existing first-generation purpose-built student accommodation assets are refurbished and revamped to draw even greater returns.

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    Student Population Surge

    Whilst the number of student admissions to universities hit an all-time high of 425,830 in 2022, the level of student property available has failed to keep up pace.

    This rise in student admissions has run in contrast to the slight demographic decline of 18-year-olds since 2015 – the number is set to rise again, however, with the number of university aged adults set to increase year-on-year till at least 2030. This is an important component to consider as it ensures demand for student property will remain consistently high.

    The easing of COVID-19 restrictions has also given rise to the number of international students returning to the UK, with the prevalence of students from Nigeria and India increasing alongside those from China.

    The diversity of the rise in students studying in the UK means that investors may want to diversify their student property portfolio to accommodate these range of needs.

    For example, whilst a lot of purpose-built student accommodation has been aimed at luxury living arrangements for international students, the growing student body may stress a need for more basic accommodation which will keep demand high over the coming years.

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    Invest Now

    Whilst the current economic climate may make potential property investors wary, purpose-built student accommodation presents itself as an investment opportunity with the potential for high returns.

    As demand rates are only set to increase, it presents itself as a lucrative alternative to other real estate assets. If you’re interested in investing in student property, why not consult our in-depth guide to student investment in the UK?

    Alternatively, you can view our purpose-built student accommodation units that are currently available by clicking here.

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    Dale Barham

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    Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.

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