How might changing visa rules impact property values on student accommodation?
As Brexit gets underway, there is the threat that decisions will be made on immigration and visa rules which will have a knock-on effect on the number of international students coming to the UK. The question is how this may affect property values on student accommodation.
International students assist demand for housing and accommodation in many towns and cities across the UK. This demand keeps student accommodation prices supported, even in areas of the country that might be considered slightly ‘off the beaten track’.
International students have to pay much higher tuition fees and, as a result, a large proportion tend to come from wealthy backgrounds.
Property developers have been quick to pick up on this and have developed high-end luxury accommodation targeted specifically at this market, with some student pads fetching rents north of £20,000 a year. High-end student accommodation often includes a concierge service, en suite bathrooms, private gyms and even security services. A whole host of other services can also spring up around these luxury digs, such as artisan food shops, coffee houses and restaurants. In some cases, international students are actually contributing to the gentrification of an area, which in turn pushes up the value of surrounding properties.
The accommodation market for international students is booming. There are very few other sub-sectors of real estate which can boast such consistent demand. In some cities — such as Manchester and Liverpool — local councils need time to digest new developments before approving the next wave of planning applications.
Opportunities for private developers in this market are usually concentrated in areas with universities that have high proportions of international students. For example, 47% of students at the University of St Andrews are from overseas, 34% of students at the University of Warwick and 33% at the University of Sussex.
International students have obvious positive effects on local economies in the UK. However, Brexit uncertainties may stymie the flow of students each year and this will not go unnoticed in many towns and cities. Students may be restricted through new visa rules or may simply be put off by uncertainties over the UK’s position on immigration.
This may already be materialising. The House of Commons Education Committee recently reported that the number of EU graduates studying in the UK dropped 7.4% over the last year. Although this figure does not include international students from outside the EU, it is a worrying trend.
Fewer international students may result in falling demand for student accommodation and subsequent downward pressure on prices. This will not be welcomed by investors and developers. The towns and cities that may be hardest hit by Brexit uncertainties are those which have high numbers of international students but low levels of substitute demand.