About This Extract
Understanding Student Accommodation Supply & Demand dynamics is crucial to inform strategic direction with respect to shifting demographics and market conditions.
That is why our Higher Education Lead Roxanne Muller has created this free downloadable report. Using a robust methodology incorporating exclusive StudentCrowd data, as well as data from HESA & UCAS, Roxanne has identified key trends in student accommodation supply and demand dynamics.
This blog contains an extract from this report, including:
- Executive Summary
- 2019 - 2022 Sector Summary
- Applicants to this cycle
- Accommodation affordability
- Impact on Letting Velocity
Want to read more? Download the full report.
Executive summary
The findings in this report have been extracted from our own dataset as well as external data sources such as HESA & UCAS. You’ll also find unique StudentCrowd accommodation affordability data exclusive to this report.
Last cycle saw an increase in student numbers but a drop in HMO (houses in multiple occupation) beds, resulting in an accommodation shortage relative to demand. This cycle, applications have decreased slightly as a result of:
- A plateau in the 18-year-old applicant pool
- A drop in mature applications (affecting healthcare subjects disproportionately)
- A mid-term plateau in applications from China
- And visa changes directly and negatively impacting applications from Nigeria and India
Accommodation prices are rising annually, with fewer incentives offered, driving up rental prices and raising a continual question of affordability. However, unique StudentCrowd insight demonstrates that affordability is not about price, but much more to do with perceptions of value for money.
The Sector - 2019 to 2022
From 2019 to 2022, the overall student population grew by approximately 17% - that’s over 400,000 people.
In the same timeframe, the number of HMOs decreased by somewhere between 60,000 and 100,000 beds, while PBSA added circa 100,000 beds over a comparable time period.
This resulted in a maximum of 40,000 actual new beds, compared with well over ten times the amount of new students, even with the most conservative figures.
Clearly, there is still a large gap between student demand and market supply when it comes to accommodation.
This has been compounded by a difficult macro environment, entailing:
- Rising construction costs & availability of labour
- Rising cost of borrowing
- A long lead time from concept and planning permission to a completed building
Early indicators in 2024 suggest that this environment is improving and, perhaps more significantly, that investors are adjusting their risk appetite.
These figures are all reflective - how is this changing in the current cycle? What do application numbers look like today?
Applicants to this cycle
*Numbers of applicants from China has rebounded slightly following a drop of 4% last year compared to the previous cycle. Overall, there are approximately 300 fewer Chinese students applying this cycle compared to 2022.
(All application figures are based on UCAS 2024 31 January Application deadline figures.)
Core demand is flat
The number of 18-year-olds in the general population in the UK is expected to continue to rise until 2030, but we are seeing a slight drop in the proportion that are applying to HE (Higher Education).
This is likely being affected by:
- A recalibration after over-recruitment during Covid
- Impact of cost-of-living
- The broadening of alternative options to traditional HE routes
For accommodation, this is compounded by a long-term trend in more 18-year-olds choosing to live at home rather than move away for university.
The mature market is shrinking
Significant numbers of mature students apply directly through clearing. From a PBSA (purpose-built student accommodation) perspective, this translates into late cycle sales and helps to fill the final rooms in a building.
However, it’s not unusual for the mature market to be directly affected by the economy:
Based on figures published by HESA which show the number of students living at home or in their own home rising from a national average of 25% in AY 14/15 to 30% in AY 21/22
International demand is variable
A high proportion of international students opt for PBSA, therefore changes in the make-up of the international cohort directly affects the mix of residents in PBSA buildings. Consider drivers of choice. Students from differing nationalities and cultures are likely to have differing budget requirements and different needs they are seeking to be met by their accommodation. For example, some students may want more communal living, while others may seek high-end amenities as priority. Therefore, good data is key to maximising occupancy and rental revenue.
Accommodation: Affordable vs. Feasible
We are already seeing the effects of these shifts in the pricing and availability of student accommodation.
Graph shows cheapest tenancy price for each room type averaged across all private PBSA buildings in the UK on a monthly basis split by academic year since November 2021 from StudentCrowd data
Year-on-year, prices have been increasing. Correspondingly, fewer tenancies have incentives this cycle compared to the same point last cycle.
Despite slight stagnation in the 18-year-old applicant pool this cycle, the speed that new beds are brought to market simply cannot keep pace with current demand and so over-demand and under-supply is set to remain in certain locations for the next few cycles. As shown in the above graph, this will continue to drive the cost of rental prices up each cycle.
The impact of all this on students is becoming clearer and it is not only accommodation choices which are being affected. In a poll we ran, 59% of students reported that their decision-making about which university to attend was being impacted by the shortage of accommodation. For 10%, it was the deciding factor.
67% of respondents described the cost of accommodation as having some influence on their choice of university. For 35% that impact was either highly significant or the deciding factor.
Impact on Letting Velocity
We are seeing a slower letting pace this cycle, although the release of tenancies to the market is somewhat faster this year compared to last.
Tracking is undertaken on a weekly basis to show the number of privately-operated PBSA buildings that have at least one room available that students can book for the following academic year.
Availability for this period is at its highest point in three years. This will be due to a number of factors including:
- Additional beds / buildings becoming operational
- The plateau in demand
- A higher focus on validating bookings in reaction to the high number of late cancellations last cycle
- Actively reducing the use of incentives
Slowing the sales cycle down with these mechanisms can allow operators to adjust marginal returns from each sale, retaining supply for later demand. However, as the cycle comes into its final third we may see some of these strategies relaxing.
Learn more
The next part of our report covers value for money perceptions, student sentiment data and key takeaways to help HE senior leaders. You can get your free copy of the report.
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