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UK Purpose-Built Student Accommodation ('PBSA') - Understanding the Factors Behind This Resilient Sector

Written and contributed by QIP's Marketing Team

The student housing market in the United Kingdom has been witnessing a remarkable surge in recent years, driven by a growing demand for higher education and an increase in domestic and international students.

As a result, investing in UK student accommodation has become an attractive prospect for savvy investors seeking promising returns. This article explores the factors that contribute to the appeal of this market and sheds light on why it presents a lucrative investment opportunity.

Rising Student Population

UK universities are renowned for their academic excellence and diversity, thus attracting a constant influx of international students. With higher education enrollments soaring each year, hotspots like London, Bristol, Manchester, and Edinburgh are witnessing a thriving student housing sector. This mix of local and international students demands modern and secure accommodations near their institutions, creating a pressing need for investment. The result? A plethora of enticing, rock-solid investment opportunities. 

1. Private Landloards and HMOs Avoid Larger Housing

To meet the rising demand for student housing, it’s supply must increase. Private developers and investors can capitalise on the market gap stemming from university-provided dorms that fail to meet the needs of the modern student. This gap presents a great opportunity for investors to alleviate the supply constraints through the development of more purpose-built-student accommodations that supports students’ rising living standards.

2. Reassessing PBSA Supply Pipeline

Reassessing the UK PBSA supply chain is another recent issue. While the development of high-end PBSA initiatives have become a noticeable trend, affordable student housing is needed. The UK PBSA sector must grow to satisfy student needs. Diversifying its offerings in the market and providing mid-market PBSA to address the diverse demands of students and catering to individuals on tighter budgets both domestically & internationally

Attractive Rental Yields

With a limited supply of quality UK student accommodation, the potential for attractive rental yields becomes a significant probability that entices investors to invest in UK PBSA. The lack of supply means landlords can charge competitive rents, which leads to favourable rental yield percentages; this asset class is a lucrative option for many investors due to the higher returns on investments than traditional residential properties.

Long-Term Tenancy Stability

As it is common for students to sign tenancy agreements for the entire academic year, with some universities offering guaranteed accommodation to first-year students, ensuring consistent rental income for landlords, this long-term stability is reassuring to investors as it helps reduce the risks associated with property vacancies and fluctuations in the rental market.

Favourable Government Policies

When the United Kingdom reached its target of attracting 600,000 overseas students per year a decade ahead of schedule, the government announced it was “firmly committed” to maintaining that number.

In order to “maximise the UK’s education potential,” the update elucidates three priorities for the future. Growing and broadening the overall export base, ensuring the continued viability of the student recruitment market, and expanding the UK’s worldwide education offerings are priority.

Robust Transactional Activity & Momentum Beyond 2023

Defying market uncertainty, UK PBSA investment has surged since 2016, with the sector claiming a noteworthy 13% share of 2022’s CRE investments. A significant 82% of this investment originates from overseas sources, notably Singapore (24%). The sector is anticipating greater transactional vigour in this 2nd half of the year, fuelled by rising rents offsetting operational costs and bolstered by consistent student growth. Stripe Property Group’s forecast predicts an impressive resurgence, envisioning the UK PBSA market to reach £4.2 billion in 2023

Investors of private equity in Singapore, with a strong appetite for UK Student Housing, are familiar with the elements driving attractive returns for the sector and stand to gain from this predicted long-term growth. Market research and due diligence are essential for finding the best prospects and maximising returns in this booming industry, as they are with any investment.


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