Student Digs Graduate to New Level

From Financial Times

July 11, 2011

By Caroline McGhie With record numbers of undergraduates, student accommodation is becoming one of the most interesting new sectors of the property market As anxious parents watch their children face the challenge of university, many may be quietly looking at ways to invest in property and help out their offspring at the same time. The cost of renting a room always comes as a shock, prompting many to wonder if it would be cheaper in the long run to buy a property, set it up as a student let and watch the capital value grow. Student digs have traditionally summoned up images reminiscent of artist Tracey Emin’s unmade bed. Bicycles crowd the hallway, there are dirty coffee cups everywhere, sagging posters on the walls, tights drying on radiators FT - Student digs graduate to new level . Now, however, student accommodation, is becoming one of the most interesting new sectors of the property market. You could say the time to buy has never been so good, with student numbers at an all-time high. The UK’s Universities and Colleges Admissions Service said there were about 700,000 university applications in 2010, a rise of 34 per cent over the previous five years, and in February this year they went up by another 2.9 per cent. Some students are clearly rushing to beat the tuition fees increase in September 2012, while others are sheltering from the recession by staying in higher education. This stark imbalance between supply and demand is motivating investors, to the extent that student housing is now classed by Knight Frank as a “key asset class”. It has also proved resilient during the recession, performing in a counter-cyclical way: when austerity bites, the nation’s house prices may drop but the student population expands and rents go up. However, market wisdom is on the cusp of change. Property experts are re-evaluating all their criteria in the light of sweeping reforms recommended by Lord Browne’s review on higher education funding and student finance, published last October. What will be the impact on student demand, and on universities themselves, of putting higher education into a more market-driven environment? Knight Frank predicts stringent budget cuts will prompt universities to sell halls of residence to augment their funding, increasing the need for new student housing. It also predicts that international student numbers will continue to rise as British degrees become more highly prized around the world. Savills estate agents also predicts an increase in overseas students. In its report on student housing, Survival of the Fittest for UK Universities, due to be published in September, it sees international students becoming a vital source of funding. “We are seeing so many parents of foreign students buying across the regional cities, whereas four years ago there were very few,” says Mark Evans of Knight Frank. According to the Organisation for Economic Co-operation and Development, in 2008-2009 Britain had the second highest share of all international students after the US.