The Mansion Group says that investors in student property should not be worried about the university spending cuts recently announced by Lord Mandelson. The Mansion Student Accommodation Fund closed on its first acquisition in December 2009 and has more in the pipeline.
Mark Stubbs, director of business development at The Mansion Group, says, “Student accommodation as an asset class is driven by supply and demand, there is a huge imbalance in the quantity of accommodation available to students. Figures for the 2010/11 academic year from UCAS highlight an increase of 12% in the number of people applying to UK colleges and universities. As the number of students grow so too does the demand for accommodation, in London we have a situation where there are 15 students to every one bed available. This is obviously a large imbalance between supply and demand.”
“We urge investors too look behind recent headlines on the spending cuts. For example, The Times reports that Manchester University is expected to accept 200 less students in the coming academic year which at first glance could be seen as worrying for investors. However, it is important that investors must put statistics such as this into context; figures from the Higher Education Statistics Agency report 39,165 students in attendance at Manchester University. Therefore these 200 cut places represent 0.5% of the overall Manchester University population.”
As the demand for places from UK post and pre graduate students grows so does the demand from overseas students for places at respected UK universities. Figures from UCAS illustrate a 16.6% increase in foreign applicants in October 2009 from the year before. Mark Stubbs continues, “International students are often less price sensitive than UK students and come from affluent backgrounds. We have found that international students also prefer to pay the rent for the entire year upfront when they first move into one of our properties which is also a positive for investors.”
He continues, “The recent devaluation of sterling has also resulted in much lower costs for international students thereby fuelling further demand. The credit crunch has also put on hold many developers’ plans to build new accommodation due to a lack of funding. Supply will therefore be curtailed for longer as there will be limited new stock coming on stream in the next few years.”
“The fact is that student accommodation as an asset class is a very strong investment, Knight Frank’s 2010 Student Property Report informs readers that rental growth has recorded growth of 5% per annum over the last six years compared with 0.6% for commercial property. The ring-fenced nature of student accommodation means that investors should be excited about investing in this asset class and the potential returns it can deliver.”
“The overall budget is going to be £7.3bn, down from £7.8bn last year, which equates to a small 1.6% cut in teaching budgets. Lord Mandelson has stated he expects these cuts to be offset by efficiency gains within the University sector. As quoted in the FT, the Chief Exec of Higher Education Funding Council for England reminded the Government that UK Higher Education generates £60bn for the economy with a 3:1 multiplier effect from the public investment. Arguably therefore, the University sector is a key and cost effective contributor to the overall performance of the UK and will no doubt be in a strong position to defend any further cuts in the future.”
Mark Stubbs concludes, “Financial institutions continue to see private student accommodation as a strong investment, highlighted by The Mansion Group’s strong relationship with Barclays who have provided funding for a number of our purchases.” Carl Lockett, property relationship director, Barclays, said: “The student accommodation sector remains an attractive asset class for us and we look forward to supporting the Mansion Group and Mansion Student Accommodation Fund with their growth aspirations going forward.”
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