The flow of international students to the UK has been significantly affected by the COVID-19 pandemic but there is evidence to suggest that a strong recovery is now underway for this 2021/22 academic year.
The importance of this for investors in the operational markets sector is that it provides much needed evidence of a strong occupier market for the development of student and private rented accommodation, something that took a hit during the pandemic.
Before delving deeper into the recovery of the market in the UK, it is worth understanding why international students are key to universities, the purpose-built student accommodation (PBSA) sector and the wider employment market.
The UK has long sought to attract international students, with the Government setting a target to attract 600,000 international students by 2030. Not only do international students diversify the population; bringing new perspectives, but they provide a key source of funding for UK universities, local economies and can have a positive impact on the skilled labour pool upon graduation. The UK’s world class universities have long been a pull factor for those looking to study overseas. In recent years, the country has been the second most popular global destination for international students, after the US, with more than 538,600 international students attending UK universities.
This rising number of international students has a direct impact on the PBSA sector. Many of the UK’s premier universities had student accommodation that didn’t attract the international market, creating an opportunity for the PBSA sector to thrive, offering alternative places to live. Overseas students in particular are more discerning when it comes to the type of accommodation they’d prefer to stay in.
Beyond the attendance at university and the economic and investment opportunities that are created as a result, it is calculated by London Economics that the net impact of international students on the UK economy was estimated to be £25.9 billion based on the 2018/19 cohort, with non-EU students accounting for a significant proportion of this. This further highlights that international students not only impact universities and their financial capabilities but they account for a significant proportion of the UK’s wider economic success.
So, have international students returned after the first year of COVID-19 pandemic?
The answer is more complex than the statistics for the 2021/22 academic year suggest. The return of international students is impacted by more than COVID-19 with the UK still being affected by Brexit and the subsequent fall in demand from EU students; according to UCAS EU acceptances are down 56 per cent. However, the latest UCAS report shows that a new high of 37,390 students from outside the EU were accepted by universities, with countries including Malaysia, the USA and Nigeria all showing significant increases.
These positive statistics are further supported by more than 280,000 international students being granted visa status in the UK according to the Home Office. In essence, the numbers suggest that international students are returning and the demand for high quality accommodation will subsequently continue to rise.
Furthermore, it is worth highlighting that PBSA is not the only sector benefiting from the return of students. A build-to-rent (BTR) operator in London has stated that international students, particularly those coming from the Far East accounted for more than 90 per cent of their bookings in August, September and October. This again suggests that appetite from overseas students has remained resilient and doesn’t only extend to student accommodation, with a number looking to BTR and the private rented sector for accommodation.
This is positive news for those in the beds sector who can expect to see significant occupier demand for their developments and investment products to continue.
About the author:
George Adams is a senior surveyor in our National Capital Markets team, he has worked with the likes of BP Pension Fund and the disposal of the Bupa care home portfolio on behalf of Abrdn.
To contact George, email George.Adams@colliers.com