Global growth in the student population has seen the number of people attending universities around the world outpace available housing supply.
The higher education sector enjoyed a boost from the global recession, as young people chose further study over an uncertain job market. As a result, student enrolment jumped 12 per cent in the seven top international student markets. Since then, markets have seen varying performance, as some countries continue to attract students and others do not. Nonetheless, the imbalance remains.
The US and UK have both seen a drop in numbers from the 2011 peak, the UK as a result of falling numbers of part-time students, according to Savills research. Spain, Portugal and Italy have also seen their student population dip. Austria and Ireland, though, have seen their population surge 44 per cent and 42 per cent respectively over the last seven years, thanks to low tuition fees and favourable demographics. Australia has also seen its student numbers rise 37 per cent in the last eight years to 1.4 million, driven by rising numbers of Asian students, as well as booming domestic numbers.
China is the biggest outbound market, with 712,000 students studying abroad in 2013, according to UNESCO. Students primarily move to the US, Australia, Japan and the UK. South Korea is the fourth biggest, with 116,900 internationally mobile students, primarily looking to US, Japan and Australia.
“Investors may do well to watch for countries and cities that benefit from a diverse international demand base, or particular fast-growing outbound markets,” advises Savills. “Of the largest student-exporting countries, Nigeria (top destination: UK) and Saudi Arabia (top destination: US) are set to see the strongest growth in higher education aged populations in the next decade, at 35 per cent and 20 per cent respectively.”
Indeed, the US and the UK are the most popular destinations for students moving abroad, making up 19 per cent and 10 per cent of the world’s higher education population respectively. Australia, France and Germany complete the top five.
To boost their own appeal, a growing number of European institutions are introducing courses in English. The Netherlands, for example, was the first European country to introdue a significant level of English-language tuition, and now boasts the largest number of enrolled students on English taught programmes, making up 57,000, or 7.2 per cent, of the total student body. Germany, with 30,500 students, is fourth, which Savills suggests leaves “significant room for growth”. France and Italy are also highlighted as markets worth considering for investors.
Regardless, the overall imbalance means that the student housing market remains attractive, if investors pay attention to the global lifestyle trends.
“Even in markets where student numbers are stagnant, opportunities do exist,” concludes Savills.
Student housing: A global asset class
19th October 2016
Student housing has grown from a niche investment to a global asset class in recent years, with investment hitting a record high in 2015.
Last year saw investment hit $15 billion in the global sector, according to Savills, which highlights how student property has bloomed into a fully-established asset class, not just in the UK, but around the world.
The first half of 2016 saw lower total investment volumes, but mainland Europe continued to rise off a low base, while US and UK student housing REITs outperformed their all REIT indices by 19 and 16 percentage points respectively.
Global cross-border investment in the sector has accounted for 40 per cent of all deals in the last three years, as international investors seek to diversify portfolios.
“Student housing is a pioneer sector, showing us all how a niche specialist and opportunistic property investment can become part of the mainstream,” comments Savills. “It is particularly instructive to observe its transformation as it is probably the first of many higher yielding alternative sectors to benefit from a worldwide hunt for income. This shows little sign of abating as central banks continue QE and a regime of low interest rates.”
Trends in student enrolment are also diverging, with strong growth recorded in Australia, Germany and France. China remains the largest outbound market, almost four times the size of India, the second largest. Nigeria and Saudi Arabia are expected to become increasingly important in the next decade.
With student enrolment rising in many locations, a lack of supply remains the underpinning factor of the sector’s success. Indeed, even in mature markets, supply remains low, with Savills pegging provision rates at 24 per cent in the UK, ranging down to 6 per cent in Australia and Spain.
“Understanding, managing and monetising income streams can be a lucrative business,” adds the firm’s research. “In the UK market, early adopters of student housing have sold at a substantial profit to the institutional investors who have dominated the market over the last 18 months. Other residentially related asset classes may yet follow the trail that student housing has forged.”
Student property resilient to Brexit effect
5th July 2016
The student property sector is Brexit-proof, according to experts, who believe that the industry will prove resilient to the fallout of the UK’s EU referendum vote.
The impact of the Leave vote has been much debated among property professionals, from the weakening of the pound in the hours following the result to the appeal of overseas destinations for those who voted Remain. Those who invest in student property, though, can rest relatively easy, note industry experts.
The Board of Empiric Student Property announced its trading update last week, highlighting an “exciting six months” for the company.
“We are not in a position to determine exactly what the consequences will be for the higher education sector in the UK, however, we believe that the impact on the operations of the Group will be limited,” said the company.
Indeed, EU students represent only 6 per cent of all full-time students in the UK, due primarily to the historical cap on the number of EU (including UK) students, as well the higher overall cost of studying in the UK (albeit subsidised) compared to continental Europe. For each EU student accepted, meanwhile, there were 7.3 applications from both the EU and non-EU, while for each non-EU student, 7.9 applications were received.
Demand is certainly still strong for housing: since the 1990s, the student population has almost doudled, with the government forecasting the number of people studying at UK universities to increase significantly by 2020.
Therefore, the board argues the UK’s higher education system is not dependent on this portion of the market.
“While students from the EU may be subject more stringent visa requirements and higher fees, there is strong demand from other international students and the potential long term devaluation of Sterling would make the UK more affordable for international students. There is also a significant increase in expectations of an interest rate fall which would be to our benefit,” added the company.
“We believe that the higher education sector and, by implication, the student accommodation sector will prove resilient, a view echoed by property market experts such as CBRE (the Group’s property valuers) and Knight Frank.”
Indeed, new research from CBRE before the referendum predicted that the student accommodation sector would be the most resilient.
“The student accommodation market will potentially prove more resilient to Brexit than commercial property, where there is considerably more uncertainty around occupier decisions,” said CBRE. “If the rental market remains stable, the student accommodation investment market is likely to follow suit and prove less volatile.”
James Hanmer, director of student accommodation at Savills, told Property Sales: “People still want a degree from a UK university, and that’s not going to change.”
CBRE noted that international investors still consider the revenue stream from student property to be “strongly diversified” enough to remain attractive, highlighting deals such as Mapletree Investments (who moved into student housing in 2015) buying the Ardent UK student portfolio for £417 million in March 2016.
Paul Hadaway, Chief Executive of Empiric Student Property plc, commented: “Empiric has experienced another exciting six months and we are particularly pleased that a significant number of assets which were under development have reached practical completion or are on schedule to reach practical completion in the next few months, in time for the 2016/17 academic year, with the resultant uplift in rental income and valuation. With the Brexit result, we can expect some market volatility over the foreseeable future but we are confident that our business model will prove to be robust.”Google+