Student housing was one of the best performing sectors during the global economic slump, according to a new analysis from international real estate consultant Savills, and is quickly becoming a key asset class on the worldwide arena. Jobs
Although sourced from short tenancies, purpose-built student housing produces consistent rental income flows that are secured by the depth and stability of demand. Growing demand from overseas students, combined with low levels of competing supply in many world-class university cities, is opening up new prospects for premium purpose-built housing investment.
Following the slump, investment in the sector grew quickly, rising from $3.4 billion in 2007 to a record high of $7.2 billion in 2013, according to Savills. While institutional investors have dominated cross-border investment to date, accounting for 57% of acquisitions by volume, Savills anticipates private wealth to emerge where student housing is still a developing market.
Globally, there are approximately 164 million students enrolled in higher education, with another 32 million expected to attend in the next ten years. Universities are increasingly relying on international students as a source of income. Their numbers are expected to increase to 3.9 million in ten years, up from just 3 million in 2011.
A growing global student market seeking high-quality, purpose-built student accommodation has spurred expansion and will continue to back demand in sectors that have traditionally catered primarily to the domestic market. This will be especially true of universities with expanding international reputations, particularly those that provide English as a medium of instruction.
"These international students have ever greater expectations of every area of living at their selected universities, generating appealing opportunities for investors in purpose-built accommodation," says Yolande Barnes, director, Savills world research.
"The market for luxury products will grow as the number of international students grows, but we don't expect it to be solely due to students crossing borders. Capital is increasingly migrating across boundaries in search of fresh investment opportunities."
With about 650,000 students studying abroad, China is the largest source market for internationally mobile higher education students, nearly doubling between 2007 and 2011. With a continuous concentration on the United States, the United Kingdom, Germany, Japan, and Australia, and increased interest in Europe, numbers are projected to continue to rise.
After China, India has the most students studying abroad (196,000), with a strong presence in the United States and the United Kingdom, followed by South Korean students (128,000), who choose Japan and the United States. Brazil is ready to become yet another major student exporter.
"Rising tuition rates around the world, technology advancements that make distant learning more realistic, and visa restrictions on international student movements are all threats to the business," Barnes says.
"Many university cities, on the other hand, have major housing shortages that warrant significant investment. The market for luxury products will be secure as the number of international students grows."