London continues to attract most overseas students

PETALING JAYA: The CBRE Student Housing Index reports that regional towns in the UK have shown an average rental growth of 3.51% for 2012/13, while London is still seeing a rental growth of 20% for its third consecutive year.

The report, which measures the student housing performance for the year to September annually, states that the rental growth in regional towns is at a three-year average of 3.36% (with wide variations between towns) while London, despite its rental growth being rather flat this year at 0.61%, still shows a three-year rental growth of over 20%.

According to the report, despite London’s rental growth falling flat after an increase in stock amid the end of the cycle rental reductions in 2012, it continues to attract the most overseas students.

Despite this, CBRE expects that after the completion of beds already under construction, the London supply pipeline will be more restricted going forward, further choked by tighter planning policies, a selective funding climate and the recovery in the other property sectors. The combined effect is likely to be that rental growth and values of existing stock hold up.

The CBRE Student Housing Index shows the average value per bed has increased to £56,600 (RM298,770) in 2012/13 from £50,700 in 2009/10, a rise of nearly 12%. This has been partly due to investments and the development of higher quality purpose-built accommodations in regional towns and cities. Investments in the region have reached £1.5 billion for the second consecutive year with developers, investors and operators seeing growth potential outside London with limited stock available.

The UK student housing market is now viewed as a global haven for international capital. The greatest news in the sector for 2013 has been the agreed sale of over 12,800 beds owned by Opal, previously UK’s third largest student housing operator, while Greystar and Avenue Capital (US), and Campus Living (Australia) have outbid numerous UK operators and other investors.

As a result, the government has acknowledged the importance of the education sector. In 2013, the government has introduced some key policy initiatives to capture the growing demand for higher education in the UK. Among them are no restrictions on certain students, relaxed penalties for over-recruitment and up to 5,000 additional places to be made available and flexibly allocated.

Total UK education exports were estimated at £17.5 billion in 2011, making education the fifth largest services export sector in the UK. In 2011 and 2012, overseas students paid an estimated £3.9 billion in tuition fees and a further £6.3 billion in living expenses. The number of international students in UK higher education could grow by 15% to 20% within the next five years.

According to the report, there has never been a better time to bring portfolios or single assets to the market, especially in London where there are so few opportunities to buy.

The report concludes that there has never been better sentiment in the UK student housing sector. — by Haziq Hamid

This article first appeared in The Edge Financial Daily, on December 13, 2013.

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