Student Property continues to outperform UK property market
Knight Frank’s 2012 student property report has highlighted the continued popularity of the asset class as an investment. Student accommodation in the UK has achieved extremely high returns for the second year running, vastly outpacing the returns generated by the rest of the UK’s residential and commercial property markets.
James Pullan, the head of student property at Knight Frank stated “Student property has outperformed every other commercial property class” explaining “A key reason for this outperformance is that there is still a structural undersupply of purpose-built student accommodation in the UK.”
However, the main investment opportunity identified by Knight Frank for 2012 and beyond, was not with conventional student accommodation as most would imagine it. The rapid influx of overseas students studying in the UK has altered housing demand, shifting it away from basic, low standard housing towards extremely high quality, purpose built, private accommodation.
Knight Frank’s report sated, ‘Non-EU overseas students have always paid tuition fees in the UK, so the new tuition fee regime will have little impact on the number of these students coming to study here. In fact the weakness of the pound is cutting the cost of education for many of those from overseas. Chinese students are benefitting from a discount of around 20% compared to before the financial crisis in 2007, thanks to currency movements’
With the number of students studying out-side their home country set to more than double by 2025, UK university education is expected to become a considerable export. Estimates show annual fees revenue from non-UK domiciled students is around £2.4 billion a year, while the total value of UK education and training are worth up to £14 billion a year to the economy.
Knight Frank point out UK universities are held in extremely high esteem around the world for quality education and offer competitive tuition fees on a global scale. Their report stated, ‘The international fees charged at UK universities for overseas students are also competitive on a global scale. The US has the highest fees. Annual charges for undergraduates at New York University are nearly £25,000 a year while Harvard charges around £21,000 a year. Fees at Australian universities also outstrip those in the UK, even at institutions ranked lower than their UK counterparts. Overseas fees for an undergraduate history degree at the University of Sydney are around £16,500 a year, while a similar course at Oxford costs less than £13,000.’
As a result, the UK’s student population of the future will contain a much higher proportion of overseas students, demanding a higher standard of student accommodation. Student property is structurally unsupplied across the board, however within that supply is a very limited level of high quality student property, creating what will become, an increasingly noticeable gap in the market over the next few years.
Source: Knight Frank