Why is student housing an emerging real estate market?

If many urban areas are reporting stagnant real estate sectors, student housing seems to remain unaffected by these fluctuations and become an investment-worthy option. Markets that stand out through high quality colleges, such as the UK, US and Germany, are experiencing unstoppable growth in the student housing sector and have even triggered a shift in student accommodation standards, redefining the image of the traditional student home. Here’s why:

Increasing demand

On the student housing market, demand is exceeding supply. As universities can’t keep up with the number of students on-campus, it’s up to independent real estate investors to satisfy this demand. Since 2009, the student housing market has increased by whopping 800% and one of the reasons for this is that higher education is more sought-after than ever. Countries like the US, the UK, France and Australia report hundreds of thousands of students and many of them come from neighboring countries, drawn by the prospects of quality education. London, Sydney, Melbourne or Manchester are just a few of the cities that have become massive student hubs where the younger population makes a considerable contribution to the local economy.

Low risk

Higher education institutions are admitting more students than ever. In fact, according to the latest research, the number of worldwide student numbers is expected to double by 2025. Unlike other groups of the population, students will always need housing, no matter the economic context, which makes student housing a relatively low risk option. Apart from high demand, there is also the fact that student houses are typically rented for at least one year, which allows owners to do annual appraisals and adjust rent prices to reflect the state of the market.

Student requirements are changing

The image of the typical student home has changed dramatically over the past decade. Shared dorm rooms with uncomfortable beds, shared kitchens and limited office space are becoming rarer, as students have higher demands and are willing to pay extra for luxury housing. Apartments on campus used to be the only available option for many years, but now, independent estate agents know the local areas better and are able to offer them better housing options situated off-campus, but close to the subway or other points of interest. The rent price can be quite steep, but the housing conditions are clearly superior, including:

  • High speed Internet
  • Fully equipped kitchen and bathroom
  • Refurbished rooms, decorated with brand new, contemporary furniture
  • Concierge services
  • Private parking and garages
  • On-site security systems

Although it is not accessible to everyone, this type of student housing fills a great gap on the market, catering to the needs of affluent students, many of them foreign, who truly want to live in a home away from home.

Most dynamic student housing markets

Markets with the highest density of award-winning academic establishments are reporting the biggest developments of the student housing sector. Notable examples include:

The US

Boasting some of the best universities in the world (Stanford University, MIT, Harvard, Princeton, Yale), the US has received record investments in student housing in 2017 – $10 billion, which is 65% more than 2015. As more than 20 million students enroll in American universities every year, and student housing is less vulnerable to economic swings, recent reports explain how investors are more interested in less traditional assets within commercial real estate. Student housing in the US remains a sizeable niche investment opportunity because of record numbers in post-grad degrees.

The UK

In spite of Brexit concerns, the UK has never seen a better time for student housing. According to experts, the influx of students coming to study at British universities does not depend on the EU and Brexit will not affect their popularity. Birmingham, Liverpool, Glasgow, London and Sheffield are currently the most developed student housing markets and reported an incredible growth in the past five years. Rent can get as high as £181 a week, but this another market where luxury student housing is gaining traction. The boutique student experience involves convenient location and rooms that resemble the ones in five-star hotels, featuring flat screen TVs and high-speed Internet.

Germany

The German housing market as a whole has become one of the fastest growing real estate markets. Prices in Berlin have grown by 20%, followed by Hamburg (14.1%), Munich (14.8%) and Frankfurt (13.4%). In terms of student housing the situation is no different. Attracting students from smaller German cities or from neighboring EU countries, universities in Munich, Stuttgart, Cologne, Bonn and Kiel are creating demand for dedicated student housing. Combined with the fact that there is a general shortage of living space in covered locations and that many students prefer renting pre-furnished apartments, monthly rent costs have gone up, making Germany a prospective market for investors.

Melissa Thompson
Melissa Thompson writes about a wide range of topics, revealing interesting things we didn't know before. She is a freelance USA Today producer, and a Technorati contributor.