Search for quality underpins UK university application numbers

Student property investment totalled £4bn in 2017, up 25% on the previous year. This strong performance looks set to continue in 2018, despite the current uncertainty surrounding Brexit.

January deadline data from UCAS reinforces this view. Despite a slight drop in total applicant numbers, down 0.9% compared with 2017/18, which reflects the smaller cohort of those turning 18 over the last year, a record 36% of A-level students across the UK applied for higher education courses in 2018.

Applications from international students also increased, bucking the downward trend seen in 2017 when uncertainty surrounding the UK’s future relationship with Europe contributed to a decline in applications from within the EU, although the numbers coming to UK universities remained high due to above-average acceptance rates.

In the 2018/19 cycle, applications from within the EU were 3.4% higher year-on-year, with an 11.1% increase in applications from non-EU applicants. Overall, applications from outside of the UK increased by 7.6%.

The number of students accepting places at UK institutions has increased over the long-term. In 2017/18, over 200,000 18-year olds and 70,000 students from outside the UK accepted places, the highest on record.

Increasing acceptance rates have been supported by a lifting of the cap on student places at publicly-funded institutions in England since 2015. This change of policy has provided institutions with greater flexibility in managing acceptances and is a mark of the support for widening participation in the sector from the UK government.

Official population forecasts suggest that the total number of 18-year olds in the UK will fall over the two years to 2020. As a result, we expect domestic undergraduate numbers will remain relatively flat over this time. Also, any potential drop in EU students is likely to be offset by growth in overseas students from outside of the EU.

In the longer term, the number of 18-year olds in the UK is projected to increase by 103,000 between 2021 and 2025, at an average of 2.8% per year. This is expected to underpin future demand. If the current rate of UK applications and acceptances is maintained, by the 2025/26 academic year there will be an additional 19,000 UK first-year undergraduates.

Future demand from EU students is contingent on key policy decisions on fees, financial support and immigration rules and therefore may change significantly. Furthermore, despite unprecedented levels of uncertainty within the sector there is a continuing need for universities to invest in campuses and to create what is perceived as value for money for new students.

The changes in demand for Higher Education will not be felt uniformly across UK institutions.

The latest data on applications by tariff band showed an increasing split in demand for courses between higher tariff band universities and lower tariff band, in recent years this has been particularly pronounced when we look at full-time student numbers in Russell Group universities, which fall into the higher tariff, compared with lower tariff providers granted university status after 1992, as shown in figure 4. Using average entry requirements for courses, we have modeled UCAS rankings for Higher Education providers placing them into three distinct tariffs (low, medium and high).

As a result, there is likely to be a greater focus on the outcomes of attending university for students especially given affordability pressures. In the longer term, the capacity within the ‘bank of mum and dad’ is likely to diminish significantly due to lower housing related wealth within the younger ‘baby boomers’. The quality of the education itself plays a significant role in attracting new students, but this is just one part of the experience.

Research conducted by Knight Frank highlights this. A ‘flight to quality’ in recent years has resulted in a fall in full-time student numbers at lower tariff universities, while generally the opposite has been true for higher tariff institutions. However, the picture is slightly more nuanced. Lower tariff universities located within multi-university cities have bucked this trend, which suggests that bigger, more populous, student locations are able to maintain their appeal.

Outside of the lecture theatres and learning spaces, the other major pull factor determining student experience is lifestyle, within which accommodation is a key component.

The 2012 increase in tuition fees seems, almost counterintuitively, to have increased students’ (and their parents’) willingness to pay for quality accommodation, which now makes up a smaller percentage of the overall cost of study. The number of undergraduates studying away from their home region has increased by more than 30% over the last ten years. This trend demonstrates a sustained shift, with even more students choosing to live in Purpose Built Student Accommodation (PBSA).

At a UK level, commercial PBSA represents approximately 30% of full-time first-year undergraduate housing choices, up from 22% five years ago. University provision represents a further 40% of housing choices, and has remained broadly unchanged over the same period.

In the future, we believe that many of the largest investment opportunities will be in partnership with universities to redevelop older and less fit for purpose stock.

Download the latest Student Property Report