With the steady growth of international student enrollment in the UK, especially from non-EU countries like China, student housing investments have become increasingly attractive. Driven by limited on-campus housing supply and strong rental growth of 3% annually, student housing yields impressive returns of over 6%, catching the attention of institutional investors like sovereign wealth funds.
New student housing construction unable to catch up with surging int’l student demand
The UK hosts over 1.7 million full-time university students currently, but only provides 568,000 purpose-built student accommodation (PBSA) beds on campus, meeting less than 30% of the total demand. From 2015 to 2018, over £4.5 billion has been invested in the UK PBSA market annually as existing student housing supply strains to catch up.
Global capital flows prefer UK student housing for stability and growth
Overseas capital from Asia and the Middle East is pouring into UK student housing, ranking only second to domestic British investors. Singapore state investment company GIC has formed multiple JVs with UK student housing operators like Unite Students, Greystar, and Student Roost, investing billions of pounds over the past 5 years. Given strong occupancy and a growing addressable market, student housing yields lower volatility compared to traditional commercial real estate.
UK student housing rents see consistent 3% annual growth from international students
Due to ever-rising international demand, UK PBSA rents have increased by an average 2-3% yearly, driving impressive total returns of over 12% annually in recent years, higher than conventional property investments. Global institutions are prepared to bid aggressively for the limited student housing supply, accepting lower yields given the stability and growth prospects.
Regional UK cities with top universities to see best investment prospects
While London sees the highest absolute international student growth, some regional university cities like Birmingham, Manchester, Edinburgh are undersupplied in student beds relative to enrollment. With petition from global capital causing yields to be compressed in prime London and South East, astute investors can look to buy student housing assets adjacent to top Russell Group universities across the UK regions.
In summary, British student housing investments have emerged as a highly sought-after asset class in recent years, delivering strong income returns to investors compared to traditional commercial real estate. International capital views UK student housing as a stable long-term play to capture rising overseas university demand.