A record number of A level students – some 424,000 or +3% compared to 2015 – are now preparing to take up places at UK universities, while the number of EU students accepting places in the UK has risen by 11% to 26,800, despite fears that the referendum result might act as a deterrent.
UK universities remain undersupplied in purpose-built accommodation and investor appetite is expected to remain strong after a record-breaking year in 2015. Last year 74,500 purpose-built student beds were traded in the UK (of which 80% were existing stock), with a total value of £5.9 billion - doubling in value compared to the previous two year average.
Traditionally dominated by UK investors and operators, the student housing market is seeing an increasing level of overseas investment appetite. Last year, UK buyers accounted for £1.6 billion worth of deals, equal to 2014, however US buyers overshadowed this, buying £3.3 billion of assets and dominating the market.
But where should investors focus their funds? Savills has updated its development league table below, which now rates 10 university cities as offering First Class opportunities for student housing development. The table ranks university cities based on the opportunities for developer activity whilst reflecting the current supply and demand across UK university towns and cities. Rankings are based on a number of factors covering current and future supply, demand, affordability and rental growth.
Development league table
Birmingham, where full-time students outnumber purpose-built bed spaces by 3:1, achieved promotion to the First division to sit alongside other major cities with large student populations and undersupplied markets.
Other promoted cities include Guildford and Falmouth, where the private rented market is increasingly stock-constrained and student numbers are rising, albeit from a much lower base.
At the other end of the league, the Pass division has seen four locations relegated, and speculative development is more risky in these 21 towns and cities.
The impact of the referendum on real estate assets still remains unclear and investors should remain cautious while the long-term policy on future immigration is decided. However, it is important to remember that EU students only account for 5.5% of total student numbers in the UK, and therefore long-term investment potential into purpose-built accommodation is likely to remain.