Student Accommodation Sector Outlook: Insights from Richard Ward

"The sector's challenge is how can new supply be delivered at various price points to ensure it caters to the needs of the majority rather than the few," says Richard Ward, Head of Research at StuRents, the UK's leading student accommodation platform.

Recently, Ward spoke to React News about how demand is changing across locations, the unexpected rise in investor interest in HMO properties, whether the market can expect to see continued rental growth, and the divide between the needs of international and domestic students. 

We outline the key takeaways from Ward's responses to React News' questions:

Supply and demand in the UK market 

While the long-term fundamentals might be positive for the PBSA market, the volatile student recruitment levels of the past few years have had a significant impact on university cities across the UK. Whether this impact has been positive or negative depends heavily on the location. Some institutions have seen an incredible spike in demand, while others have had to scale back due to over-recruitment. 

Changes to visa requirements for international postgraduates, particularly those from India, have curtailed growth, meaning growth in student numbers has not been uniform across all institutions or locations. On a national level, if demand continues to grow, existing bed shortages will be exacerbated.

Like demand, supply growth varies hugely between cities. For example, while national growth is expected to remain well below 2%, Bath and Nottingham have reported growth in the supply of private student accommodation of more than 10% year on year for 2024-25.

The outlook of the national supply pipeline

As planning activity has decreased, unsurprisingly, delivery of stock has slowed down. For the 2023-24 academic year, only around 12,000 new beds came online. Rising construction costs and the cost of debt have made delivering new stock much more expensive.

Even as costs start to stabilise, they remain raised in comparison to historical levels. This limits the opportunity to build new accommodation at viable or affordable levels. 

"In 2024-25, we might see a slight increase in the number of beds delivered, but this is likely to remain short of demand growth," says Richard Ward.

Rental growth expectations

While rental growth might not reach the same levels as last year, it is expected to remain high, unless the pace of supply growth can increase enough to prevent it. 

This is supported by a recent StuRents survey which found that 61% of respondents expect to see rental growth of 5.0 - 9.9% this year. 

The make-up of student accommodation

The UK student housing market is increasingly reliant on the private sector, with 80% of new beds delivered by 2018 provided by this investor type. As there are limited developments in the pipeline from universities, the proportion of supply delivered by the private sector is likely to grow even more.

There is increasing institutional interest in the HMO market, driven by demographic trends, including the rise in the number of 18-year-olds in the UK. Typically, this demographic prefers HMOs to PBSA, particularly in their second and third years at university.

Analysis of executed tenancies for the 2024-25 cycle shows that students living in HMOs typically pay £154 per person per week outside of London, once adjusted to include their bills. Comparatively, the cost of delivering new PBSA is between £180 and £200 a week.

The effect of changing student demographics 

The PBSA market is heavily reliant on international students who typically have higher budgets for accommodation. In 2023-24, students in South Asia had an average search budget of £192 per person per week, outside London. By contrast, their UK counterparts had an average listing view price of £147 per person per week.

There have been many reports about the decline in international students coming to the UK, partly impacted by changes in visa regulations that deter Indian students and an economic crisis in Nigeria. However, the actual impact on the sector will vary depending on the specific operators' exposure to these demographics. Many operators still have China as their key target market, meaning the effect of the decline in students from other countries will be limited. 

Read the full interview with Richard Ward on React News.