We’ve covered the student property market in this blog before. But let’s look at what’s going on in the student property market this year.
There’s no denying that student property, whether buying, selling or letting it, has become a very important part of the property market in recent times. Student property can provide good yields to landlords and investors. It can be a very good source of business for agents, with properties being relet regularly every year.
Of course, the property market overall has changed considerably over the last few years. So where is the student property market heading right now?
The demand for student property
Student numbers at UK universities have been growing year on year for many years now.
It’s likely they will continue to keep rising for some years into the future due to a continued rise in the number of 18 year olds – although by no means all go to university of course. According to this report while there were 741,000 18 year olds in 2022 there will be 855,000 in 2030.
The government’s own figures suggest that student loan demand will be 7% higher in 2027/28 than it was in 2021/22. That might suggest that there will be a 7% rise in demand for student accommodation over the next 4 or 5 years too.
The supply of student property
Student property usually comes to the rental market through three main routes: There are student halls provided by universities themselves, sometimes in partnership with a commercial provider. There are purpose built student accommodation or PBSA developments built by investment companies and operated by specialist student accommodation operators. There are also student house shares and student HMOs which are normally provided by small private landlords and investors.
The supply of PBSA accommodation has increased considerably in recent years. Operators have brought thousands of new student beds into the market, suggesting that PBSA investors see a lot of potential in the market.
But this rise in supply might not continue into the future. This report from Knight Frank says that new supply of PBSA isn't keeping pace with increases in student numbers. It says there are 25,700 bed spaces currently under construction for autumn 2023, and a further 69,500 beds with planning permission. It says escalating and uncertain build costs, wider inflationary concerns, skills and labour shortages, financing costs, and planning policy could all limit future supply of this type of student accommodation.
Supply could also be tightening in the private student accommodation market. Factors like increased regulation and the removal of tax allowances have prompted some landlords across the PRS to sell up. This seems to be affecting the student accommodation market too.
What’s going on in the student market now?
Several reports suggest that there is already a shortage of student accommodation generally. Some students are having difficulty securing accommodation. Last academic year, some universities had to house students in temporary accommodation some distance away from their universities, or even suggest that they defer their courses for a year.
This report quoting StuRents, a student property search engine, says that there is a shortfall of 207,000 student beds, as well as a 10% undersupply of beds in 19 towns and cities. They also suggest there will be a shortfall of around 450,000 student beds in the UK by 2025.
It’s important to note however that this situation isn’t the same right across the country. Not everywhere has a shortage of student accommodation. Save the Student says that places which are particularly badly affected include Durham, Glasgow and York. Other reports suggest Glasgow and Manchester also have a shortage.
Where is the student property market heading?
It seems likely that a change has begun in the student property market. From a situation in recent decades where supply and demand of student property has been fairly well balanced – or there was even a surplus in some places – it seems this type of accommodation could be in short supply in the future. Demand is likely to keep rising but supply is not going to keep pace. There could even be something of a student housing crisis in the offing.
What might that mean for those involved in the student property market?
Students may need to plan further ahead when looking for accommodation for the next academic year. They might need to budget to pay higher rents than they expected due to high levels of demand as well as rising costs generally.
Agents who let student property should find plenty of demand from students. They might have to work harder to find landlords and properties to let however.
Student accommodation landlords should find good demand for their student property. If student rents rise and property prices fall, as is widely forecast, they could find that yields on this type of property rise beyond what are already pretty good yields. This state of affairs could even tempt some landlords and investors back into the student property market.