Graduation hats held up in air

UK’s purpose built student accommodation market boosted by increasingly demanding student population

It’s no secret that the UK’s student population is growing. UCAS recently reported that the number of applicants to higher education in the UK had increased 3% year on year, with a record number of students (approximately 493,000) placed for the 2016/17 academic year.

Alongside these increasing student numbers has been a sharp rise in the number of students choosing to live in privately owned purpose-built student accommodation (PBSA). Knight Frank reports that the volume of UK students living in PBSAs has more than doubled over the last decade, making it one of the few property sectors to deliver positive rental growth each year since 2007.

Central to this has been the rise of an increasingly savvy and demanding student population. In 2012 the UK government increased the upper limit for tuition fees; with educational institutions now able to charge British and EU students up to £9,250 per year for tuition and this figure being even higher for international students. This has led to increased competition amongst institutions, with massive investment ploughed into the facilities and services on offer to students.

With the UK’s educational institutions competing for applicants, this has put the student population in a position of power. As a result, students have become increasingly demanding in their expectations; including the standards of accommodation on offer to them.

Last year, Glide Utilities reported that expectations of an en-suite bathroom had become an industry standard, while 61% of students also expect their room to have a double bed. Students are leaving behind the low-quality, damp-ridden HMOs (Houses of Multiple Occupancy) located miles from the university campus and instead opting for high quality, contemporary, purpose-built accommodation complexes managed by specialist agencies.

These complexes, in addition to providing students with a much more attractive living environment, can often work out cheaper than HMOs, as bills are included and additional facilities (such as gyms, storage, communal game rooms and parking) are often provided free or at significantly discounted rates.

For investors there are many reasons why student accommodation investments present such an attractive proposition. In the past five years the average weekly rent across the UK has risen from £120 to £143 for en-suite accommodation, representing a growing return on investment and increasing value within the sector. Currently the market is worth an estimated £42.3bn, rising by approximately 37% since 2014. With investment and ongoing construction, official forecasts predict that this figure will reach £45bn by the end of the year and £50bn by 2020.

As demand for PBSA continues to grow, the market is set to become increasingly valuable as a field for investment.

View our opportunities to invest in purpose built student accommodation.