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Why the student accommodation sector will weather the Brexit storm


Why the student accommodation sector will weather the Brexit storm

Although it’s too soon to gauge the impact of Brexit on the student accommodation sector, most voices from the industry suggest that it won’t be adversely affected. It isn’t totally immune; some of the key factors that will impact student accommodation providers in the UK post-Brexit are: 

  1. Weak pound and the threat of recession 
  2. Future of student recruitment in the UK universities
  3. Rise in the demand for student housing in Europe 

Let’s take a close look at each of these factors and see how they can potentially affect student accommodation providers. 

Weaker pound
The slumping Sterling will cause many problems for individuals and industries in the UK, but it is unlikely to hurt the student accommodation providers much. 

The student accommodation industry has proved resilient to recessions in the past. The uncertainty and threat of recession may put new student housing projects on hold for 18 to 24 months, but as the demand for housing consistently outstrips supply, there is unlikely to be a negative impact on the revenues. 

Study International notes that the weaker pound will also have another side effect: reduction in the cost of studying in the UK. This is likely to make the UK a more attractive option for non-EU students: 

“While many Britons are mourning over the UK's imminent exit from the European Union, international students are celebrating the weaker pound which has led to lower tuition fees and cheaper shopping prices. The result could be the arrival of more non-EU students to the UK, even as the country may seem less attractive as a study destination for EU students in the long term.”

Student recruitment by UK’s higher education
Higher education institutes in the UK are shocked by the Brexit vote and concerned about its impact on their future. An open letter drafted by 103 universities and published in the The Independent on 20 June highlights the importance of European students in UK’s universities: 

“The impact of our universities on our local communities and economy should not be underestimated.  Every year, universities generate over £73 billion for the UK economy – £3.7bn of which is generated by students from EU countries, while supporting nearly 380,000 jobs. Strong universities benefit the British people - creating employable graduates and cutting-edge research discoveries that improve lives.”

A survey by the careers advisory service, Hobsons, showed that many international students were unsure of pursuing their studies in the UK post-Brexit. 30% said that they were less likely to study in the UK post-Brexit, while 6% were definite in their decision of not studying in a post-Brexit UK.  Two out of every three students surveyed were worried about the difficulty of getting a visa while many others expressed fear of racism. 

However, 17% students said that Brexit would make UK universities more attractive. As the UK will remain a part of the EU for at least two years after the Article 50 is activated, students from Europe will not be forced to pay international fees, nor will they face stringent Visa requirements during that time. 

While it is possible that the student recruitment sector might lose out on European students, CBRE, the world’s leading commercial property and real estate services adviser, points out that while fees from non-UK EU students contribute to 2.4% of university funding, the higher-paying non-EU international students contribute 12.7%. As the higher education sector doesn’t rely on a single stream of student recruitment, it is unlikely to be too severely impacted by Brexit. 

Student accommodation opportunities in Europe 
While the student housing markets in the UK and US has reached a level of maturity and consolidation, the industry is still in a nascent stage in the EU. The post-Brexit uncertainty is likely to stall new developments in the UK, and student accommodation providers are likely to take the opportunity to invest in the EU. 

Remi Network quotes LaSalle Investment Management to highlight the potential opportunities in the European market: “Assuming that 50 per cent of EU students who were planning to study in the UK decide to study in another EU country, this creates additional demand of 10,000 to 15,000 beds per annum, which is significant for cities such as Frankfurt which currently have just 1,500 beds in purpose-built student housing.” 

Summing up 
Taking into consideration the various surveys around student recruitment and the voices from the student accommodation leaders, it can be concluded that Brexit will not have a negative long-term impact on the industry. In the near future, we may see student housing companies invest in tier 2 cities in the UK and more aggressively explore opportunities in Ireland and the EU.

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