The student housing market: investing in the future of education

How is the student housing market evolving and what does it offer investors?
What is the attractiveness of investing in student housing in Europe?

The problem with student housing

Modern higher education institutions are facing the acute problem of finding housing for their students, which opens up new horizons for private investors. Global trends in higher education are driving increased interest in investing in the student housing segment. This area is becoming increasingly tempting, and data from the last three years shows that the number of those who positively evaluate investment opportunities in this area has increased by 2.5 times, according to information from Statista.

Market acyclicality

One of the peculiarities of this market is its independence from economic cycles: student flows can increase in times of economic downturns as well as in periods of growth. For example, according to Savills, in 2016 student housing investment reached a record high of16.4 billion dollars. As part of PwC's survey of 800 large European investors,32%of respondents expressed their intention to invest in the student real estate segment in the coming years.

Student Housing Formats

Student housing refers to housing designed exclusively for student rentals. There are many formats, such as:

dormitories
communal apartments with shared bathrooms and kitchens
modern residential complexes with studios

These facilities are typically located near educational institutions, making them convenient for students, although they may sometimes be located off-campus.

Services and amenities

Dormitories can offer a variety of accommodation options, ranging from apartments with hotel services to simpler offers with minimal services. In the first option, the rent includes:

cleaning
bed linen change
breakfast provision

Modern student micro-apartments typically include several furnished rooms of up to a35 square meters. Residents of the complexes can enjoy various amenities such as:

laundries
fitness rooms
pools
common recreation areas with green roofs

Strategies for engaging students

Interestingly, managers and owners of such facilities actively work to attract students by offering various discounts and promotional offers. For example, popular rental conditions include bonuses, such asfree tablets for use in common areas.

Key markets

When it comes to key markets, the student housing market in the US is considered the most significant. According to data as of two years ago, the country had approximately20.3 millionstudents, including5%were foreigners. According to Savills, the average price for renting student housing in the United States ranged from200 to 2,200 dollars. In 2016, investment in this sector fluctuated at an impressive .9.8 billion dollars.

Conclusion

Thus, the student housing sector is an active growth area that is attracting growing interest from investors. The steady demand from students, as well as the variety of services provided, creates many opportunities for future investments in this area.

Rental yields for investors

Rental yields for investors in the student housing segment average around 5.9%.

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In European countries such as Germany, France, the UK and the Netherlands, there is high interest among students.

Students in Germany

Germany was most active in 2016-2017 in welcoming almost 2.8 million students, of which 12% were foreigners. During this period, direct investment in student housing in Germany amounted to 750 million euros, and in 2017, according to preliminary data, it passed one billion euros. Rental prices for student apartments in Germany range from €200 to €850 monthly.

Rental yield

According to Savills, rental yields on student housing in Germany are as high as 4%, which is the best compared to standard residential properties, where yields are only 3%. Germany has become the leader in investment growth in this sector, with an increase of 380% in 2016, according to Savills.

Students in France and the UK

In France and the UK, the share of international students is 12% and 19% respectively. Student housing rentals in France show more affordable prices, ranging from 200 to 1,200 euros. In the UK, minimum rental prices are comparable to global standards, while maximum rates can reach €2,300.

Geography of students

Returns on such assets in these countries range from 4.0% to 4.5%, with a slight dip to 3.75% in London.

Number of students per country

Looking at student enrollment, the:

In the U.S., about 20.3 million (of which 5% are foreigners).
Germany has 2.8 million (12% foreigners).
France has 2.6 million (also 12% international students).
In the UK, about 2.3 million (19% foreigners).

In 2016, investments in student housing totaled:

9800 million euros in the US.
750 million in Germany.
170 million in France.
4,500 million in the UK.
425 million in the Netherlands.

Attractive markets for investment

Among other European countries attractive for investment, Savills highlights Poland, Hungary, Portugal and the Czech Republic. Micro apartments are becoming increasingly interesting not only for students, but also for tourists, which eliminates seasonal fluctuations in demand inherent in traditional student housing in small towns.

Prospects for investment in microapartments

The popularity of such apartments increases by the beginning of the school year, while in summer they often remain vacant.Sofia Bulanova, investment consultant, emphasizes the need for investors to consider the purchase of microapartments that can be rented out to students, tourists or business travelers. This significantly reduces the risk of such properties sitting idle on the rental market.

Conclusion

In this article, I have taken a detailed look at the current situation in the student housing market, which is proving to be not only an important aspect for students, but also an attractive area for investment. With the growing number of students, when universities are unable to provide housing for all of them, private investors are coming to the rescue by creating new housing opportunities. The globalization of higher education is an important contributing factor to this process and clearly demonstrates that the demand for student housing will only increase.

Variety of student housing formats

Student housing covers a variety of formats, from dormitories to modern micro-apartment complexes. Interestingly, such investments remain relevant both during periods of economic recovery and crises, which emphasizes theiracyclicity.

Key markets

I also looked at important markets, such as the US and Germany, where student housing has become a stable and profitable asset for investors. Based on the data, it can be seen that student housing rentals offer investors good return potential as well as the opportunity to mitigate risk with flexible offerings:

Comfortable accommodation with full service
Simpler options to meet the different needs of students

Prospects for the future

It is expected that the attractiveness of the sector will continue to grow, and by following the market trends, investors can reap significant benefits. In conclusion, I would like to emphasize that the student housing market holds a lot of promise - both for students receiving a comfortable learning environment and for investors willing to develop this growing market segment.

I am sure that in terms of social and economic trends, we will see further development of this sector, and everyone interested should think about participating in it.