The demand for UK Higher education is very healthy
- The number of students studying in the UK’s universities was at its highest ever number in 2016/17 (latest available HESA), rising to 1.8 million full-time students and growing at a Compound Annual Growth Rate (CAGR) of 1.8% since tuition fees rose to £9,000 per annum for home and EU undergraduates in 2012
- The increase in tuition fees raised student expectations and encouraged a greater focus on good employability outcomes. A flight to quality universities has led to a polarisation in the levels of recruitment achieved by different institutions, and this has driven more students to study away from home.
- Government caps on student numbers in the UK were removed altogether in 2015/16, and in 2017/18 the participation rate of 18 years olds from England increased to a new high at 37.4%, up 1.1% on the previous year.
- Participation is rising despite a demographic dip in the number of 18 year-olds which takes place until 2024 (when levels recover to those seen in 2015). After this time HEPI estimates that an additional 300,000 places will be required at universities to cater to the additional demand.
- 18% of full-time students in the UK are postgraduates, and there has been a marked increase in UK postgraduate students in 2016 with the introduction of loans for master’s level study, with an increase of 5.3% in just 1 year.
Student Accommodation is a Robust Asset Class
- UK student accommodation yields have recently experienced less volatility than other real estate sectors
- Student accommodation rental growth in the UK of 3% per year between 2014 and 2016, has surpassed all other real estate asset sectors and significantly outpaced RPI
- UK student accommodation transactions reached £4.6 billion in 2017 and £3.5bn in 2016, with significant investment from international sources (CBRE)
- Significant pent up demand for transactions has been witnessed through the number of bidders for each portfolio sale in recent years, those unsuccessful bidders retain a strong appetite to invest here
There is a shortfall of student accommodation – both volume and quality
- With more students studying away from home than ever before, demand for accommodation near successful universities is increasing
- Today’s students want “plug & play” accommodation (bills, internet etc.) in very convenient locations
- Purpose-built student accommodation supply remains well below student numbers in key UK university cities and is not meeting the strong demand due to the growth of successful universities
- London is particularly badly affected by a shortfall in supply, and affordability, but many of the UK’s top institutions are held back by shortages of accommodation
- Beds which are being built do not cater for some of the most strategically important groups of students to universities, including UK undergraduates and most postgraduate students
- Investment into University’s own accommodation remains behind the level needed to address both the shortfall in numbers and the maintenance issues on campus
- Pressure on Houses in Multiple Occupations (“HMOs”) through implementation of licensing and Article 4 Direction in many cities means that the overall supply of student housing is being constrained
Students from outside the UK are an important part of the student population
- Students not from the UK, including both EU and non-EU students, account for 22% of the full-time student population in the UK, some 404,000 students
- Demand from overseas has steadily increased with non-UK student demand rising 2% per annum compounded, since 2012
- The number of international students is expected to double globally by 2025
- In 2015 the UK attracted 13% of the 3.3 million students leaving their home country to study in OECD countries, second only to the US who attract 28% (OECD Education at a Glance 2017)
- International students are attracted to the quality of the UK's universities and teaching, a globally recognised qualification and the opportunity to experience life in the UK
- The rise of the middle classes in many nations has increased demand for higher education overseas, as students and their families wish to demonstrate global citizenship
- International students were reported by Universities UK and Oxford Economics to be worth £26bn to the UK’s economy in 2014 (report produced in March 2017 http://www.universitiesuk.ac.uk/policy-and-analysis/reports/Documents/2017/briefing-economic-impact-international-students.pdf)
- The number of students enrolled outside of their country of citizenship has increased by 4.8% per year (CAGR) from 1975-2025 (estimated)
- The Migration Advisory Committee is due to report its findings on the value and impact of international students on the UK's economy in September 2018.