Investors in student rental housing hunt for new growth pastures in mainland Europe

New opportunities in student housing beckon in continental Europe, while the UK and the US still rank as the top investment choices for most investors from Hong Kong

PUBLISHED : Tuesday, 11 October, 2016, 11:03pm
UPDATED : Tuesday, 11 October, 2016, 11:05pm

Investors in student housing properties are diversifying their portfolios into mainland Europe, with countries on the continent seeing a 21 per cent year-on-year growth in investment volumes as of the second quarter of 2016, according global property consultancy Savills.

Despite the strong pick up in mainland Europe, the UK and US markets still received the most investment into existing student housing assets in the first half at US$1.4 billion and US$5.4 billion respectively, it said.

Asians boost global investment in student housing

As of the second quarter of 2016, year-on-year investment volumes of existing student housing stock grew by 82 per cent in the US, but fell by 64 per cent in the UK.

Marcus Roberts, director of student investment and development at Savills, said the US and UK student housing markets have dominated global investment in the last three years.

“But with the maturing of these markets, investors are looking to other areas which are suffering from a pressured housing supply, shortage of student accommodation and immature management solutions,” he said.

“While Germany and France continue to attract attention, we are seeing new frontiers open up in markets such as Austria, Ireland, the Netherlands, Italy and Spain,” said Roberts.

These are markets where student housing is currently under supplied but demand is likely to grow due to increased domestic and international mobility of students and growing demand from students opting to study in Europe.

“Student housing has proven itself to be a resilient asset class to date, and with its counter-cyclical fundamentals many institutional investors are turning to the sector where they can achieve strong occupancy and rental growth. This will be further exacerbated as central banks continue quantitative easing and a regime of low interest rates,” said Roberts.

But another property agent Landscope Christie’s International Real Estate said UK is still attractive due to the falling pound.

Is public housing becoming student housing?

“We have five times more enquires now than two months ago. Hong Kong investors are mainly looking for retail shops. Some look for redevelopments. Purpose built student housing will shine,” said Landscope chief executive Koh Keng-shing.

The pound dived in Asia trading on Friday, which traders blamed on concerns over Brexit and a flash crash in the market. The pound fell 6 per cent at one stage to US$1.1841, the biggest fall since the Brexit vote.

Alistair Meadows, head of international capital group, Asia-Pacific, for JLL said student housing has moved into the mainstream in the UK alongside office retail, industrial and hotel investments, with growing interest over the last five years.

“If we look at it from the perspective of Hong Kong, or Asian investors generally, we see a direct correlation between education and investment,” he said.“What we tend to find is that, where family investors or ultra high worth investors themselves or their children are being educated, they will seek to invest.”