Once upon a time, students lived in the cheapest shared houses confined mainly to the suburban areas of the city. Today, the situation has changed completely and student housing in London is big business for wealthy overseas investors. Spacious studio flats with sophisticated interior design in central and fancy locations, equipped gyms, swimming pools, high-tech cinema rooms and concierge services. These are only a few superb facilities students look after when choosing their accommodation. Moreover, the rent price doesn’t seem to be an issue at all – ranging from £250 up to £600 per week.
The big boom started in 2015 when, according to Savills, £5.8bn was laid out overall in order to provide students with a “boutique” luxurious experience. Investments mainly came from the US, China and Russian billionaires, with the latter handing over more than £535m for a new development in west London where students are willing to pay as much as £2,200 a month for a single studio.
The business has been growing ever since and demand for investment is still strong despite concerns that Brexit might cut the number of international students coming to the UK. Property consultancy Knight Frank estimated a total record of £4.7bn for new projects to be completed by the end of 2017 and expect even more to pour in next year.
Student accommodation has strong capital potential and it is relatively low risk, says Hiew Yoon Khong, chief executive of Temasek’s real estate company Mapletree. The largest negotiation of 2016 was in fact closed by Temasek, acquiring 25 student accommodation buildings, 5 in London and 20 in the major cities of the United Kingdom, worth £417m. Over the last four years, some of the biggest student housing providers including Mansion Student Accommodation, Liberty Living and Pure Living have been taken over by foreign investors, who saw a stable asset class with tremendous returns.
As we know, records are there to be broken in London, and this is what happened last year with a £12.5million Park Lane townhouse becoming the world’s most expensive student accommodation. The 3,540-square foot townhouse will mainly attract students from the Middle East who are ready to pay £4,000 a week for nothing short of five-star luxury. The luxury three-bedroom townhouse features glass floors, a roof terrace with a view of Hyde Park, designer furniture and opulent chandeliers. Wetherell Estate Agents described 80 Park Lane as the “ultimate address”.
The reality is that demand for good student accommodation will remain high and investors will continue to spend in order to have larger portfolios and build scale quickly. We can therefore expect further investments in the UK market in the months to come.