After the Brexit delays one, two, and now three … is it right to act defensively and wait till after the general election before investing? The only way to answer that important question is by studying the evidence. We’d suggest the answer is clear.
New strategies have already been introduced by our current government, the Department of Education and Department of International Trade that will undoubtedly attract overseas students from all over the world and continue the almost uninterrupted 14 year increase of domestic and international students applying for UK university spaces.
Does Brexit make a difference to purpose built student accommodation developers?
We looked at some of the main developers in the student market, all of whom have delivered thousands of student beds over the last decade. It’s clear that they aren’t sitting idle – for the most part it would be described as business as usual. However there have been a few changes.
“main developers have slowly started to raise their prices
and we are expecting others to quickly follow suit”
We’ve seen a significant number of developers raise the purchase price of their units. As Sajid Kazmi, Senior Investment Expert for REW explains, “Naturally the main developers have slowly started to raise their prices and we are expecting others to quickly follow suit. Pricing student projects is a very straightforward process. It takes the land purchase cost, adds the build cost (construction, labour and materials) and then adds the developers margin and that is your sale price. With the pound trading low and much of the pre-fabricated materials being bought in Euros, this is already increasing build and labour costs and this has had to be built into prices for margins to be maintained”.
As well as the weaker pound, developers we spoke to have cited potential tariffs on imports, and a more competitive labour market as potential causes of subsequent price increases. We’ve seen many investors take the opportunity to get more investment for their money ahead of recent price increases in Liverpool and Cardiff.
Sajid adds “If you are an overseas investor you get more bang for your buck right now than ever before. The weaker pound means a rupee, yen or euro buys about 20% more than it did just a few years ago. It’s been great for investors and for foreign students too – Part of this low is based on uncertainty, it’s an artificial low and whichever way the election or Brexit goes, there’s no doubt the pound will rebound to above its current levels in the short to medium term. Most of my more experienced investors are seeing this as a rare opportunity”.
The current government have already put their strategies in action
- Undergraduate and Masters students will be able to stay in the UK to look for work for six months after graduating
- They will also have three months before graduating during which they can find work and change from a UK study visa to a UK work visa
- PhD students will be able to stay in the UK for a year to find work after graduating
- International graduates will be given two years after graduating during which they can apply to switch their UK study visa to UK work visa from outside the UK
“applications from Chinese
students up by 30% since last year”
And recent statistics point to even more good news for the student property sector. Applications from Chinese students to study are up by 30% since last year. Ucas university admissions agency reported in July this year it had received 19,760 applications compared to 15,240 in 2018.
For Indian student applications we saw a 5% rise compared to 2018, Ucas reported in July. Reports say 4,690 Indian students applied to up take courses for the 2019/20 in-take and last year 4,470 applications were received.
For next year’s intake 2020/21 we expect further increases in applications following the UK Government’s announcement of a new two-year post study work visa for foreign students.
Home Secretary Priti Patel commented, “The new Graduate Route will mean talented international students, whether in science and maths or technology and engineering, can study in the UK and then gain valuable work experience as they go on to build successful careers.”
“It demonstrates our global outlook and will ensure that we continue to attract the best and brightest.”
The new route will launch for the 2020/21 intake of students. After the two years, they will be able to switch onto the skilled work visa if they find a job which meets the skill requirement of the route. We’ve identified the best locations for overseas students which has led to a lot of investment in the last couple of months.
All parties have University Students & Education on its agenda
The Conservative Party
“a policy change announced in 2019 will
attract 600,000 international students by 2030″
The Conservative party has been working closely with key institutions over the last two years to improve the policy on unrestricted post-study work rights for undergraduate and master’s degree students. A policy change announced back in March 2019 was a strategy to attract 600,000 international students by 2030, and to greatly increase the value of its education exports.
When the strategy was announced in March, the Department for Education (DfE) said: “There is no limit on the number of international students that can study in the UK, and to ensure the UK continues to attract and welcome them, the post-study leave period will be extended to six months for undergraduate and master’s students, and a year for doctoral students.”
Labour / Lib Dems
The Labour and Liberal Democrats have both indicated they will scrap tuition fees completely. So all parties are pro increasing numbers.
So are there any reasons to wait?
In short… absolutely none. The reasons to invest now are that prices are set to increase almost uniformly once we have clarity from the election, whatever the result. Overseas student numbers are at an all time high. And therefore, so is demand.
A good example is an on-campus student property investment called The Printworks in Preston. With income fixed until 2027 the market won’t have any relevance until 2028. Prices currently start at £63,000 and the assured annual return is currently 10% net for 5 years. However, as reported above prices are set to rise by £5,000 in January reducing the annual return to 9% net. This means investors would be at least £8,000 better off by investing now.