New data from real estate advisor CBRE has revealed that university affordability has worsened. Rents for student accommodation across the UK’s major university towns and cities have outgrown and outpaced maintenance loans.
The shortage of accommodation and student beds intensifies, as the country faces a potential 620,000 shortfall by 2028. CBRE analysed the purpose-built student accommodation (PBSA) sector in the UK’s 30 major university towns and London.
Outside of the capital, the maximum maintenance loan that can be secured by each student is £10,227 per annum – an 18% growth since 2018/19.
However, the average rent for an en-suite room per annum is £8,700, and a studio per annum is £11,950 – reflecting 27% and 37% rental growth respectively for the same period. In 2024, maintenance loans will increase by only 2.5%, increasing pressure on university affordability.
“Historically London has been the only UK city where the affordability of student rents hasn’t aligned with the available maintenance loan.
“However, we’re now seeing this same trend play out across our key regional university towns.
“As maintenance loan growth lags and the cost of attending university grows, we could see a shift in where they choose to go.
“More than ever, the cost of living is becoming a key decision driver for domestic students when deciding where to apply to study.”
Tim Pankhurst, Head of Student Accommodation Valuation, CBRE
In London, the maximum maintenance loan is £13,248, however, for a student looking to direct-let an ensuite, the average cost comes to £17,085 per annum. This increases to £22,185 for a studio room.
In Bristol, the most expensive city for PBSA outside of London, the average price for a student bedspace ranges from £335 to £382 per week while Manchester averages £249 to £295 per week. Brighton averages £285 to £341 per week, and Edinburgh averages £214 to £301 per week.
“There is a significant wall of capital targeting the Living sector in the UK.
“PBSA yields are typically wider than Build to Rent yields, and CBRE’s PBSA Index has shown an average total investment return of 10.78% in the last 12 years.
“These consistently strong returns coupled with the availability of income-producing opportunities are attracting new and returning capital – both domestic and international.
“The development of PBSA still faces headwinds. However, with conditions predicted to become more viable in 2024 and the current scarcity of quality-built stock, institutional investors will return to forward fund new developments.“There is a window of opportunity to fund schemes in core markets and partner with quality developers delivering schemes with the highest of ESG credentials.
Oli Buckland, Head of PBSA Investment, CBRE
“Leveraging this investment capital would make it possible to address the chronic shortage of student accommodation our University sector is facing, which will only intensify in the next five to 10 years.”
Despite the supply and demand imbalance, CBRE’s data shows that there is still ample interest in the sector from institutional investors, which can be leveraged to increase the supply of beds.
Just under £4bn worth of investment deals took place in 2023 alone. Universities are also increasingly looking to the private sector for the development of PBSA, as budgets become further constrained.
