Investment in French student housing “growing rapidly”

 

The UK’s student housing market has long been one of the most popular sectors on TheMoveChannel.com, driving activity consistently in the past two years. The sector’s anti-recession cycle, with demand for university accommodation climbing regardless of the wider economic climate, has strengthened both its appeal and the yields on offer.

The trend is far from isolated, though: according to Savills, interested is growing in French student housing too.

This is despite limited supply putting downward pressure on prime yields causing them to move in by 20 basis points in the last three years to between 5.3 per cent and 6.5 per cent.

Investmen5 volumes in 2014 fell to €55 million compared to the €211 million recorded in 2013, but activity is very much driven by new developments and forward funding. The lack of both in 2014 restrained opportunities for investors. Going forward into 2015, Savills expects investment volume to range between €80 and €100 million, in line with the past five-year average, as investor interest for the segment grows rapidly.

By comparison, UK student housing investment in the first quarter of 2015 reached £3.5 billion.

Between 60 per cent to 70 per cent of stock is owned by private investors or occupiers in split ownership structures, finds Savills. Additionally it remains primarily a domestic market with 72 per cent of all investment in 2014 driven by French investors. However, it is slowly opening up to international parties, notably the Dutch, representing 16 per cent, the UK at 7 per cent and German investors (4 per cent).

Marcus Roberts, head of student housing investment at Savills, comments: “Although the share of student housing investment remains marginal compared to the total commercial property volumes and requires a degree of specialism, there is a clear potential in the sector for strong returns. The shortage of supply while demand is on the rise offers good investment opportunities with achievable yields above the traditional residential and commercial sectors.”

Indeed, enrolement in French universities has rise in the past four years, while recent visa changes have made France a more appealing choice for international students, as well as the country offering some of the lowest tuition fees in Europe.

“Investors are aware of these factors and therefore see the growing appeal of the sector,” says Savills.

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