In a world of growing competition and globalisation, the key to prosperity is knowledge. Nowadays, more than ever before, people are willing to invest in their own or their children’s academic training. The number of students has increased and students no longer see national boundaries as a barrier. As students move to and within Europe to study, the demand for student housing will only become greater. According to the latest MarketUpdate from Bouwfonds REIM, the European student housing market is an underexposed attractive investment category that deserves more attention.
Mainly due to a shift towards an open knowledge based economy the number of students is increasing. More than ever, students are willing to travel for the best university in their field. Employers prefer students with foreign experience since they are often more self-reliant and entrepreneurial. The number of students who choose to study abroad more than fourfold between 1975 and 2009. In the next decade, this growth is expected to continue.
Europe is a top destination for students from all over the world since it is home to a large number of top universities worldwide, but also many of those universities offer English language programmes with relatively low tuition fees.The cultural and historical aspects of European cities also make them an attractive destination for many foreign students. On top of this Southern European students increasingly choose to study in Western and Northern European countries as a result of the uncertain economic outlook and high unemployment rate in their home countries.
Housing is a basic need for all students, but in most European university cities there is a clear shortage of modern and affordable student rooms. New purpose built supply will be insufficient to meet future demand resulting in rental growth. Despite the fact that governments might cut down on scholarships the average student studying in Europe will be able to pay the rent. Other sources of income (self-earning, parents) or loans are expected to compensate for this.
According to Bouwfonds REIM’s analysis, the European student housing market is an attractive investment market. The student housing market is characterised by continuing strong demand and a clear lack of supply. Additionally, it is anti-cyclical, delivers secure rental income and often has an alternative use. Remarkably, yields on student housing are substantial higher than those of regular housing. The additional risk premium is on average 1.5%.
Dimf Ghijsels, Head of Research Bouwfonds REIM: “When conditions are tough in traditional real estate investment markets, investors tend to look for ’attractive’ alternative real estate sectors. One of these is student housing. However, European student housing has not yet been ’discovered’ as a new and interesting opportunity. One of the causes might be its under-researched market characteristics.’