2016 saw the UK achieve its second highest ever investment volume into purpose built student housing with $5.84 billion (£4.5 billion) ploughed into the sector and three of the world’s five largest individual student housing investment deals over the past 18 months taking place within its borders.
All three were by international investors: the largest was Singapore sovereign wealth fund GIC and student accommodation developer GSA’s acquisition of a 7,150-bed student accommodation portfolio for US$900 million.
To those outside the industry this may be surprising: why, when there are question marks over both the continuation of European research funding to UK universities after it leaves the EU and its potential appeal to foreign students, would so many commit to UK student housing?
The answer is that many international investors continue to view student accommodation as a stable asset class with strong returns. Investment in UK purpose built student housing continued unabated after June 2016, despite falling volumes in other sectors.
International students, too, found that their money suddenly goes further in the UK than before and therefore have not been deterred from applying to study here, consequently ensuring that occupancy rates, and income, remain high.
In addition, the UK’s higher education sector enjoys an exceptionally strong international standing, built upon hundreds of years of university heritage. This did not suddenly change on the morning of 24 June 2016: the appearance of UK universities near the top of global rankings will remain for the foreseeable future. Beyond the league tables, London’s status as a global city also means that it continues to appear at the top of many young people’s wish lists as somewhere to live and experience.
The UK’s vote to leave the EU does bring some uncertainty, particularly around European research funding, as well as the treatment of academic staff from the EU and the ongoing management of student immigration, but none of these are sufficient to deter large volumes of students or indeed investors, who see UK student housing as a resilient, well performing investment class.
The reality is that good student accommodation will always remain in demand, and the mood in the sector remains buoyant. Investors are willing to pay premiums for larger portfolios, driven by their need to allocate their investment capital and build scale quickly, so we expect to see further activity in the UK market in the months to come.
Read more: Savills Spotlight: World Student Housing