Student accommodation 'remains massive investment opportunity'

Research experts at high-end agency Savills say a total of £5.3 billion is expected to be invested in the student accommodation sector this year, up 17 per cent from 2016.

The agency says the UK student sector is now an established global market, attracting rapidly rising levels of international investment, so far largely unaffected by the Brexit vote. 

International investors - mostly putting money into purpose-built accommodation projects - have almost doubled their market share in the past two years, it says, up to 64 per cent in 2016 from 35 per cent in 2015.  

Much of that international money - 26 per cent - came from just two investors in Singapore, Mapletree and GIC. “Singaporean sovereign wealth fund GIC is one of the most experienced investors in the UK student housing sector. Their continued investment in 2016 is a massive vote of confidence in the sector” says Jacqui Daly, director of Savills investment research and strategy.

The Brexit vote does not yet appear to have impacted investor appetite. Savills estimates that some £2.1 billion of student housing stock traded in the second half of 2016, against £1.9 billion in the first half of the year. 

“Student housing is countercyclical, making it a good hedge against other risks. That and the currency discount make UK student investment especially tempting to international investors,” says Daly.

But the firm warns that the landscape is changing thanks to uncertainty regarding the treatment of international students post Brexit. 

“We see less capacity for investors to drive rental growth outperformance unless they have the very best quality stock in the best locations” says Savills.

It says three locations - Exeter, Guildford and Leeds - have graduated to the ‘first’ tier for investor potential. “Their success in attracting new students combined with limited supply, make them particularly attractive for new purpose built development” explain Savills.