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.
A recent report by Savills 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 HighGround 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.