Covid-19 Impacts PBSA Valuation
27th Jan 2021
A report published by Savills reveals that 2012 and 2013 saw £5 billion worth of student sector standing stock and development sites sold, indicating the high likelihood of seeing increased levels of investment in the student accommodation sector throughout 2014. The early months of this year supported such predictions, with transactions worth £950 million, equating to over 17,000 beds - activity that is far beyond the comparative months of 2013 and 2012. With a further £1.4 billion worth of investments on the market, Savills predicts year-end activity to reach £2.5 billion. This is no surprise given the investment yields achieved on UK student housing. IPD and Savills research report that in 2013, UK student houing yields outstripped 10-year gilts by close to two-fold and out performed all UK residential gross yields.
2013 witnessed an increase in the number of deals in regional markets, indicating that the previously London-centric purpose-built student accommodation development phenomenon is spReading to other major student hubs across the UK. Interestingly, Savills also reports that 1 in 4 students now live in purpose built student accommodation, a consequence of the rapidly maturing market and aggressive investment in the market over the last 5 years, driven by compressed investment yields elsewhere and increasing student numbers. Investment has also been encouraged by central govenment's desire to free up existing housing stock to families struggling to get on the property ladder. It is estimated that the provision of new purpose-build student accommodation across the UK could release close to 80,000 homes back into the mainstream market.
However, the report highlighted that significant future uncertainty around the sector does cloud the otherwise seemlingly obvious investment decision. Tuition fees have caused major uncertainty amongst students; due to increases in tuition fees, reports show that the number of university applicants fell during the academic year of 2012/2013. Furthermore, if Scotland leaves the UK following the independence referendum, there will be further ambiguity over student fees given Scotland's current subsidy for Scottish students studying in Scotland (EU law would require an independent Scotland to offer equal access to its universities, either by subsidising all european students studying at a scottish institution or by dropping the current subsity offered to Scottish students.)
27th Jan 2021
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