The UK’s Purpose-Built Student Accommodation (PBSA) sector is thriving, according to international property advisor Savills, with an anticipated one million university applicants per year by 2030, fuelling the demand.
The latest UCAS application data reveals the number of undergraduates surpassing 600,000 for the second consecutive year, culminating in a first-year cohort larger than the population of Sheffield seeking accommodation annually. This rise in demand is expected to put further pressure on the existing PBSA stock.
James Hanmer, head of UK PBSA investment and co-living at Savills, highlighted the UK’s appeal as a top global destination for international students. He said: “International students are 60% more likely to live in PBSA than domestic students, with those from India being more than twice as likely.”
A significant shortage of stock is expected due to the decline in buy-to-let mortgage redemptions, which have exceeded 300,000 since 2017. This has resulted in 31% fewer 5+ bed properties listed for rent in Q1 2023 compared to pre-pandemic averages.
Despite the potential supply issue, the pipeline for new stock stands at only 144,000 beds nationally, with just a quarter of these under construction. The high occupancy levels are likely to support a forecasted rental growth of around 7%, driving strong investment returns in the coming years.
Savills’ PBSA Development League Table indicates significant development opportunities in Canterbury, Durham and Glasgow. These cities have witnessed a substantial rise in their student populations and increasing applications, which will place additional stress on existing stock.
Investment activity in the PBSA sector remains robust, with a record-breaking £7.8bn of stock traded in 2022, an 89% increase on 2021 figures. With 82% of investment in UK PBSA in the last three years coming from overseas, particularly from the USA and Singapore, the sector is expected to remain attractive for investors.
Richard Valentine-Selsey, head of European Living Research & Consultancy at Savills, commented on the opportunities for investors. He said: “The current supply and demand dynamics create a compelling opportunity for investors to deliver much-needed new PBSA, particularly to target the growing domestic student population.”
Despite the challenges posed by rising build costs and implications of higher interest rates, Savills’ latest research reveals strong demand from lenders to finance both development and investment opportunities in the PBSA sector, especially for quality projects.
