Will 2016 be the year for student property to shine?

Will 2016 be the year for student property to shine?

Last year was one in which student property became a shining jewel in the crown of British property, finally making its move from the perception that it was a niche or underground asset class, into the mainstream. Sure, the two years prior saw real investment come into the marketplace, but 2015 witnessed a doubling, with more than £5.5 billion spent in the sector from investors keen to get a slice of the strong returns on offer. 

With returns of up to 12 per cent available from these investments, putting it far above more traditional asset classes, and a seemingly endless supply of tenants coming into the market year after year, investors are desperate to get a piece of the pie. But will this carry into 2016? We take a look at some of the possibilities. 

A shift in intentions

One thing is certain about 2016 for student property, and that is that nothing is set in stone. Uncertainty is king at the moment with the EU referendum and new laws for landlords generally up in the air. However, we should see a continued level of investment in student housing, even if intentions change angle a little. 

Savills believes that the coming year will see a move away from landlords going it alone and investing in single properties, with two reasons behind this. On one hand, the increase in Stamp Duty investors will face from April is likely to dull the desire for investments in the way we've seen previously, while on the other a lower-level of existing stock will potentially leave landlords seeking out new angles for investment. 

So what does this leave? One option is an increase in institutional investment, where individuals buy into a percentage of larger package, owning units within purpose built properties that are designed and constructed for the student market. This helps deal with both of the factors Savills highlights, and means a real possibility that we could see 2016 matching 2015 for investment, even if the money is coming in from a different place. 

Student growth

While in any other sector, uncertainty and a lack of stock would be likely to bring about a drop in investor sentiment, the sheer levels of demand that exist in student property mean this is unlikely in the immediate future. There haven't been fantastic rises in the number of applicants this year, but UCAS' early figures, released after the January deadline, seem to suggest a growth in the number of people overall for another year, continuing the trend seen since 2012. 

The biggest demographic change has been seen in the areas with regards to foreign students. Those applicants from outside the EU and in the EU excluding the UK have both increased in numbers this year, with a one per cent and six per cent rise respectively. This continued growth means a sustained demand throughout the student property sector, helping to boost investor sentiment and keeping up the amount of money coming into the market. 

With foreign students also the key for growth, it could mean we see a rise in higher-quality accommodation being built. Those from overseas tend to come to the UK with a little more to spend in terms of their accommodation than their British counterparts, and they have a reputation for seeking out higher standards (particularly those from outside the EU), meaning we could well see more top-end student homes becoming the focus in the months ahead. 

Whatever happens in the rest of 2016, however, one thing seems to be sure; student property has enjoyed a number of good years since the fears over what higher fee caps would do to applications was allayed. This year is likely to be no different, with continued student number growth looking as if it will give landlords the belief they need to put even more money into student accommodation.