student university cities

UK university cities see soaring demand for student property

Rental demand in university cities in the UK has increased, with landlords already seeing a boost in yields when they target popular student locations. 

The UK’s higher education offering has long since attracted thousands of students from overseas, as well as nationally, and new research from Savills has revealed a 6% increase in full-time student numbers between Q2 2017-2019 and Q2 2023.

In total, the UK is now home to a record 2.3 million full-time students, made up of both UK-based and overseas nationals, which is 91,000 more than last year. Over the period between Q2 2017-2019 and Q2 2023, there has been a 24.5% drop in the number of homes available to let, says Savills, leading to a shortfall.

However, in many ways, this is not a new issue, points out research analyst Toby Parsloe, who says that student rental property supply has been dwindling to some degree in recent years due to the number of buy-to-let landlords who invested in the early 2000s that are now ready to retire and sell.

Top 30 university cities

The UK is known worldwide for its high quality university education options, which is why demand for student rentals retains its high level. Added to this is the fact that more young people than ever opt to enrol on a higher education course due to the ever increasing competition in the jobs market.

It is across the country’s top 30 university cities that the biggest squeeze in purpose-built student accommodation (PBSA) has been noted by Savills, where there is now around a quarter less supply compared with demand. Ten out of the 30 have seen a double-digit increase in the cost of student accommodation as a result.

Glasgow in Scotland is one city that has seen the highest rental growth out of the top 30 university cities, with a 33.5% rise since the pandemic. This is followed by Salford (29.3%) and Nottingham (28.9%).

London is one of the most popular locations for students, particularly those from overseas, and the city also has the highest level of PBSA beds in the UK. Yet at the same time, there are 3.8 students for every bed, leading to a significant shortfall compared to the UK average of 2.9.

Rents in London have increased by 12.8% in the past year across the average student rental property, while areas like Durham, Canterbury and Bath are also seeing rental stock struggling to keep up with demand. These university cities also attract large numbers of students from abroad thanks to the world-class education on offer.

Demand will continue to rise

Savills notes that as landlord numbers dwindle, the university-aged population is also expected to increase over the next decade. This coincides with a rise in the number of students opting study in their home cities, rather than move to university cities or towns further afield.

The report notes: “UK higher education is a strong sector with impressive global reach. Ensuring students can be accommodated close to their chosen university, for their full university experience, is vital for retaining the sector’s favourable reputation.”

According to Toby Parsloe, research analyst at Savills, these issues with a supply shortage in the rental market have been “bubbling for many years” across UK university cities, and are now being exacerbated by factors such as interest rate rises, tax relief reductions and landlords reaching retirement age selling up.

“As students across the country digest their A-level results, the excitement will be building as many prepare to head off to university,” he added. “However, many will face growing challenges in finding a place to live as continued high levels of university applications are putting increased pressure on already competitive rental markets.

“With the university-aged population projected to grow over the next decade, and even as more students opt to study in their home cities, there is a need to deliver more purpose-built student accommodation to tackle the competition for housing that students currently face.”

In separate research from Stripe Property, it was recently revealed that buy-to-let returns near universities can be as much as £6,000 higher.

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