UK Student Housing to See £2.5 Billion Investment Rise in 2023

In a recent report by JLL, the UK's Purpose-Built Student Accommodation (PBSA) sector is projected to reach approximately £2.5 billion in total volumes of accommodations for 2023. While this figure represents a 30% decrease compared to the record-breaking year of 2022, it underscores the resilience of the student accommodation market in the face of economic challenges. This decline in investment volumes can primarily be attributed to the broader economic landscape, marked by a significant increase in interest rates from 1.75% to 5.25% over the past year, resulting in a more cautious student housing in the UK investment environment.

Despite this dip in UK student housing investment volumes, JLL's latest insights into the PBSA sector reveal that investor sentiment remains strong. A survey conducted by JLL in July found that 41% of investors regarded student accommodation as the most resilient sector, marking a notable increase of accommodations from 30% in the previous January survey. However, there has been a shift in expectations regarding the timing of recovery, with most respondents now anticipating a recovery in the second half of 2024, as opposed to the initial projection of the second half of 2023. This delay in student housing in the UK recovery can be attributed to lower real estate pricing expectations over the next year. Nevertheless, the PBSA sector appears well-positioned to minimize declines in the student housing capital values, thanks to its resilience, growing demand, strong occupancy rates, and potential for rental growth for student accommodation in the UK.

JLL's research on student housing also indicates that while yields across all sectors have softened compared to the peak rates in 2022, the living sectors, including PBSA, have demonstrated more resilience than traditional 'core' sectors. Ultimately, pricing in the market hinges on the intersection of seller expectations and buyer affordability. The student accommodation in the UK yields are estimated to have shifted by approximately 100 basis points from their peak levels.

Huw Forrest, Head of student housing in the UK - Living Capital Markets at JLL, noted, "While the economic environment is very challenging, investor sentiment remains positive, and the PBSA sector upholds itself as a resilient market, with deals continuing to happen." He highlighted the sector's strong rental growth forecast of 5% or more in the coming years, with available stock at reasonable pricing and a less competitive buyer pool. Forrest emphasized that this could be an opportune time for cash buyers or those willing to delay financing to invest in the PBSA sector, anticipating a more competitive buyer landscape in the next year as the market adjusts to potential peak interest rates and increased confidence.

Thus, despite a decrease in student accommodation investment volumes, the UK's PBSA sector demonstrates robust resilience, making it an attractive prospect for investors. This resilience, along with growing demand and the potential for rental growth of student housing, positions the sector as an appealing investment option in the UK student housing market. Are you a student looking for the perfect student accommodation in the UK under your budget? Check out our ultimate guide for the types of student housing under your budget. List with amber to stay updated with the recent happenings in student accommodation.