Many investors are betting that the supply-imbalance in student housing in London will continue to grow, as the influx of international students appears to be deepening the extensive housing shortage in the capital.
Let's take a look at some of the facts:
- According to real estate consulting firm JLL: about 3.5 billion pounds worth of British student housing deals have been done so far in 2015 - already more than double the value of deals completed in 2014.
- Britain has 1.8 million full-time students (foreign and domestic); but only about 525'000 purpose-build student beds are available. According to JLL, about 220'000 of those beds are commercial properties.
- Rents have been rising 3 to 4% a year, with occupancy rates remaining at about 97-99%.
- The five-year growth rate of international students has been 20.3%, compared with 8.3% of EU students and only about a 1% increase for the domestic market.
All of these factors have resulted in intense investor interest, as international pension funds, major private equity players and real estate giants are building up or selling off large portfolios of buildings for handsome profits.
'The pool of international buyers is expanding because the returns are attractive, the cash flows are attractive and there are platforms for trading rather than individual assets,' said Brett Lashley, a managing director at Greystar who is based in London.
However, British students are worried that because many of the new builds are marketed to international students, they are becoming increasingly high-end and expensive, and many other students have to scrape to live in them. Indeed, in The National Union of Students' last survey on affordability, it found that the cost of housing had more than doubled in the last decade - and if this trend continues, the supply-demand equation may become even more imbalanced.