University accommodation faces increased demands and costs
Today, it has been revealed that demand for university places has hit a record high, however due to the pandemic, there is a slowdown in delivery of new accommodation.
Rising costs and inflation are also hampering construction viability. Issues of affordability will also mean a potentially growing differential between the maintenance loan and the cost of living impacting where people study.
The report from real estate services firm Cushman & Wakefield show there are now over 2 million full-time students studying at UK university, setting a new record for higher education demand.
More students than ever are studying away from home, an increase of more than 220,000 compared to five years ago.
Overall, 1.63 million students now have a requirement for bed space during their course of study.
Student rates in rent are also rising, with the average annual private sector outside London now standing at £7,055. 71, which is 74% of the maximum student maintenance loan amount.
The average university price is £6,482.5, which is 68% of the maximum student maintenance loan amount.
The rental growth for 2021/22 stood at just 1.07%, however this is set to bounce back in the next 12 months to 3.1%.
The significantly stronger rental growth for the forthcoming year is indicative of increased confidence and the strength of demand in most locations, with most rents set before the full impacts of current inflation are evident.
The next academic year will also see several markets delivering upwards of 8% rental growth.
The segmentation of rents across markets continues, and clear differences can be seen between average costs for the same quality products in ‘low’, ‘medium’, and ‘high’ rent markets.
For example, an average rent for a good quality scheme in Cardiff, Liverpool, Newcastle, and Sheffield is priced at £143.71 per week, 16% lower than the £166.13 seen in the mid-priced Birmingham, Nottingham, Leeds, or Southampton.
In turn, this rent is 18.5% lower than seen in expensive markets such as Bristol, Bath, and Manchester, £203.72.
Considering a typical 44-week length, a student in a high-priced market could therefore be paying £2,641 more per annum for the same quality room than a student in a low-priced location – 95% or 67% of the maximum Student Maintenance Loan, respectively.
David Feeney, a partner in Cushman & Wakefield’s student accommodation team, said: “Affordability will continue to be a big issue for the sector both for providers and students who are having to account for the impact of the cost-of-living crisis.
“Rents are rising while maintenance grants have failed to keep pace.
“Only a limited number of students from the least wealthy households actually receive the maximum loan amount, meaning that only those with a household income of less than £25,000 per annum receive a loan higher than the average private sector en-suite rent.”
Mr Feeney added: “Despite this the number of young people seeking to go to university remains extremely strong and the challenge now for accommodation providers will be to continue to deliver a pipeline of new stock against a backdrop of multiple construction challenges.
“However, despite that from an investment perspective, the total of academic facilities opening between 2020 and 2025 will likely be north of £7 billion which is a record for a five-year period.”
The report also revealed that universities ranked below 100 in the league tables are growing the fastest, outpacing universities in the top 25.