The UK student accommodation sector is currently navigating through choppy waters, with rents climbing sharply and the number of available properties failing to meet the burgeoning demand. This imbalance has serious implications for students, landlords, and investors alike.
A Surge in Student Rents Amidst Stagnant Loan Increases
Data from StuRents, a dedicated student accommodation portal, paints a stark picture: student rents have escalated by over 10% in a year-on-year comparison. This jump in rental costs starkly contrasts with the modest 2.8% increase in student maintenance loans, highlighting a growing affordability gap for students seeking housing.
As it stands, the weekly cost for a single room within a shared student house averages £122. However, those opting for purpose-built student accommodation (PBSA) are facing heftier price tags, with average rates reaching £184 per week — a 50% premium over shared housing options.
The Race for Accommodation Begins Earlier Than Ever
The report from StuRents sheds light on a trend that should ring alarm bells for prospective student tenants and property investors: the letting cycle for the 2024-25 academic year has kicked off in some cities sooner than ever before. This unprecedented rush is a clear indicator of the acute scarcity of student accommodations throughout the nation.
Bullish Market Dynamics Propel Rental Growth
Richard Ward, the head of research at StuRents, comments on the market’s robustness from the perspective of operators, stating, “Supply and demand fundamentals at a national level remain extremely bullish for operators.” Such market dynamics are not just fueling current rental growth but also point to significant increases for the 2024-25 letting season.
A Looming Bed Shortfall
Looking forward, the gap between supply and demand seems set to widen. Projections suggest a potential shortfall of nearly half a million beds by 2026. The surging demand is attributed to multiple factors:
- A demographic spike in the number of 18-year-olds
- Increased domestic applications driven by the pandemic
- A rebound in international applications, notably from India and China
Students Stretch Their Budgets Amid Inflation Concerns
The report also touches on students’ willingness to stretch their housing budgets, with an average increase of 7.3% observed, pushing the weekly budget to £152. This uptick signals a quest for quality accommodations. Nonetheless, the ominous shadow of rising inflation, currently at 6.7%, coupled with the looming hike in student debt, foreshadows more profound affordability challenges on the horizon.
Pandemic Fallout: Mental Health and the Need for Supportive Housing
The pandemic’s legacy extends beyond economic factors, significantly impacting student wellbeing and mental health. The report underscores the urgency for accommodation providers to extend greater support and flexibility to their tenants, acknowledging the crucial role of housing in overall student welfare.
Planning for the Future: A Lull in New Developments
An examination of planning activities reveals a sluggish pace in the approval of new student accommodations. In the first eight months of 2023, while applications for 27,000 new beds were submitted, only 13,000 received the green light. This figure is considerably lower than in 2018 when 37,000 new units were proposed, and a far greater proportion, 33,000, were approved.