Will Student Property Investment Survive Brexit?

Student property is the UK's highest-yielding property investment sector, and it has grown recently into one of the most popular - but will it be survive Brexit?

by Mark Burns

The result of the EU referendum has thrown most investment markets into doubt, and many student landlords have started asking themselves whether the student sector will continue to perform well as the UK takes its leave from Europe.

Investors have both general and specific concerns about how the sector is set to weather Brexit. In general terms, the vote has already had a marked shock effect on the UK economy across the board, and forecasts for the direction things will take as the actual exit process gets underway are not exactly optimistic. More specifically, investors are concerned that Brexit will hit the number of international students coming to the UK from the EU. Young people from overseas are a key group of tenants for student housing, particularly for purpose-built student accommodation.

However, property is expected to be one of the sectors that weathers the storm relatively well, and a closer look at the current state of the student property investment market suggests that it is in a strong position to continue performing for its investors. The fundamentals that underpin the sector are strong, and the extent of Brexit's impact looks likely to be limited.

Student numbers within the UK have been on the rise, and are still headed upwards at an impressive rate. UCAS data shows that last year, 532,300 people began their studies at UK universities, which is an increase of 3.1% on the previous year. The market is already short of supply, and the increase in student numbers makes it hard for developers and landlords to narrow the gap let alone close it.

Furthermore, leaving the EU is highly unlikely to put a stopper on international student’s altogether even if it does prove a setback for young people from within the union. Students are coming to the UK in large numbers not just from Europe but from all over the world. Currently, large non-European markets such as India and China are the subject of a major recruitment drive from British universities, and supply a sizeable and growing number of international students who are unlikely to be fazed by Brexit.

On top of this, students across the world are becoming more internationally mobile, with increasing numbers of young people choosing to study overseas. The UK is currently second only to the US as a popular destination for international students, so it enters the uncertainty of Brexit from a very strong place.

Ultimately, Brexit or no Brexit, where there is a market there will be potential for investment. Currently an estimated 91% of first-year students, according to one major developer in the sector, lack access to purpose-built accommodation. The continued growth of UK student numbers and the strong international profile of British universities means that even if this figure should shrink it is unlikely to dwindle too drastically.