The rapid increase in the number of international students seeking to attend universities in Europe is boosting the attractiveness of student housing as an investment, delegates heard at PropertyEU's Student Housing and Micro Living Investment Briefing, which was held on Tuesday at the London offices of Nabarro LLP.
‘International students are the future,’ said Samuel Vetrak, CEO of StudentMarketing. ‘The numbers of domestic students are decreasing, due to demographic trends, but that decline is more than compensated by the increase in foreign students targeting continental Europe.’
By 2020 there will be an additional 335,000 international university students in Continental Europe, plus an additional 310,000 short-term exchange students on Erasmus-type courses, according to StudentMarketing research, moving to over 40 competing destinations.
Investments of €2 bn a year are needed to attract them, as ‘student housing is a necessity and an integral part of the value proposition, and demand already far exceeds supply’, said Vetrak.
China tops foreign student league
In the list of countries sending students to Europe, China has the top spot with around 800,000 while India takes second place with 233,000, followed by Germany, France, Nigeria and the US. Arrivals from Asia are registering double-digit annual growth.
‘The sector has excellent prospects because it is resilient to economic downturns and geopolitical shocks,’ said Vetrak. ‘In China, India and elsewhere an education abroad is increasingly seen as a necessity rather than a luxury, and the rich students coming from distant countries are the ones who need structured student housing.’
The longer the distance from home, the more the students are likely to demand purpose-built accommodation with modern facilities. As the sector has become more mature, investors are now looking at a wide range of criteria before committing their capital: not just demographic trends and growth rates but also local regulations, distribution, student preferences and summer demand, as many buildings are used for young professionals or tourism in the summer months.
UK leads way in Europe
In Europe the UK led the way in student housing and it remains the largest, most mature and most liquid market but it has now reached a plateau, said Vetrak. Foreign student numbers are decreasing, partly due to tougher visa requirements and partly to uncertainty over Brexit. Continental Europe, by contrast, is growing fast: Germany in particular, where universities have made a concerted effort to attract foreign students, is gaining popularity, as are France and the Netherlands.
Southern Europe also presents interesting opportunities for investors because the gap between supply and demand is particularly wide. Three Italian cities – Rome, Milan and Florence - are in the top-three list of most under-supplied cities in Europe, with just 2-3% of beds needed being supplied by the market. Lisbon in Portugal is at 4%.
Spain has a further claim to investors’ attention because it is attracting large numbers of Spanish-speaking students from Latin American countries to its fast-improving universities and business schools.
‘Demand from international students has doubled in the last decade,’ said Patricio Palomar, director of alternative investment in the capital markets group at CBRE Spain. ‘Their numbers will only increase because the quality of education is improving, the Spanish language is a draw, the quality of life is high and affordability is good.’
Some 31% of enrolled students are away from home and need accommodation, he said, and the most under-supplied cities are not Madrid and Barcelona, where much of the investment is directed, but fast-growing university towns like Valencia, Seville and Granada.