When it comes to investing in student accommodation, people are being reminded to decide on a city-by-city basis. While it can be tempting to get swept up in the hype of the student market, thanks to a supply-demand imbalance and strong yields, Savills is stressing a clear head is essential. Spotlight on European Student Housing 2013 makes it clear any decision must be made based on conditions in each city, not nationally.
Savills analysed investment risk of 119 cities that are home to Europe's top tier universities. In addition to compiling a selection of locations with strong universities, low supply and high demand for investors, it also highlighted areas where student accommodation may not be the best horse to back. High saturation and growing numbers of purpose-built student housing in some locations mean markets are already jam-packed with landlords. However, there are those where supply remains low and yields high.
The UK is certainly the most popular place for student investment at the moment, accounting for 28 per cent of cities within the top European city investor opportunities. London, Edinburgh, Oxford and Manchester are just a few British places identified as having strong prospects and lower risk. However, Savills claims increased fees, high rents and visa restrictions could affect the future of the market. Combined with a growing number of European institutions offering courses in English to attract students, the UK could find itself challenged over the coming years.
Yolande Barnes, Savills director of World Research, said: "Yield compression in mainstream property assets is boosting the appeal of student housing particularly for commercial investors looking to spread their exposure into residential. It offers relatively high yields and low voids, producing a secure income stream on a single operational lease. In this way it could be considered a stepping stone to ‘build to let’ or purpose-built mainstream rental blocks in the open market rental sector." However, she stressed that investors need to "look beyond headline supply-chain demand and yield indicators to fully understand market strength".
- Thursday 18 July 2013