Student housing in the UK could potentially become a significant and established asset class because of the constant and enduring nature of higher education, according to global real estate services provider Savills.
The new report – entitled ‘Spotlight: World Student Housing 2014’ – suggests student housing is a sound investment as it generates reliable rental incomes, which is secured by stability of demand, despite the fact it is built upon short-term tenancies.
Due to this consistency, student housing is a natural subject for securitisation, which Savills suggests is happening increasingly in the form of real estate investment trusts (REITs).
According to the global real estate firm, the market “came of age” during the economic downturn of 2008 as there was a surge of students as jobs became scarce all over the world. Subsequently, the demand for housing grew rapidly, often outpacing the available supply.
The number of students needing accommodation has grown significantly during the last decade, meaning demand is following suit. But, Savills claims that even if rates of growth dipped the market would still be enlarged significantly, meaning there is a potential for the market to mature further and for “supply to become more sophisticated”.
According to the report, the UK is the second most mature market – behind the US – as it expanded at a rapid pace during the early 2000s. The sector even managed to maintain some of that momentum during the recession as universities facing financial difficulties joined forces with private providers to revamp and refurbish existing housing, rather than building afresh.
Savills notes that the student housing sector has increased 780 per cent since 2009 when the US and UK markets are combined, reaching a new high of $7.2 billion (£4.3 billion) in 2013. This figure was achieved during a time when real estate investment remained suppressed across the world. Last year, office investment volumes were down 43 per cent down from its 2007 peak across the globe and retail property investments were down 20 per cent.
Savills claims the need for student housing has grown dramatically over the last ten years.