UK Student Housing

UK Student Housing
 
University challenge

10 May 2017, by Jacqui Daly

The UK student housing market performed well in 2016 despite a difficult set of circumstances

 

Investors traded 68,000 student beds worth £4.5bn last year in the face of severe headwinds. We expect £5.3bn to trade in 2017, or 75,000 beds.

This represents 17% more money changing hands for just 10% more stock. There are some very large portfolios to come to market this year, which will trade at a premium to reflect their size. On the opposite page Brook Burton explains the portfolio premium in more detail.

FIGURE 1

2017 Initial Yields

 
Figure 1

Source: Savills Research

2016’s performance was slightly lower than the record set in 2015, which saw over £6bn worth of student housing change hands. However, the volume traded in 2016 was still 54% higher than the average for the last five years.

Many more of these deals took place in the second half of the year, as investors opted to wait for any market movement following the outcome of the EU referendum. The UK’s decision to leave the EU does not seem to have affected investment appetite – in fact, it may have intensified it. With sterling now worth less relative to many other international currencies, deals are highly attractive to overseas investors.

The appetite for student housing assets has outgrown the supply of available stock. Of the £4.5bn traded in 2016, £1.1bn (25%) involved forward funding developments while £223m (5%) were development sites. Existing stock made up 69% of trades, the lowest proportion on record. We expect this higher level of investment in development to continue this year.

The trend towards consolidation has continued. This has had a striking effect on our rankings of student housing investors. Two of our Top Ten investors by number of beds are new entrants to the list, having not invested in the UK student market at all until last year. This shows how student housing has established itself as an attractive asset class worldwide, even in the face of political risk.

FIGURE 2

UK Student Housing Investment Activity

 
Figure 2

Source: Savills Research

placeholder

Subscribe to Savills research

 

Would you like to be notified via email about new research?