New student accommodation supply not keeping pace with student numbers
More than 560,000 new undergraduate students have been placed into UK universities or colleges for the 2022-23 academic cycle, according to data from UCAS, up slightly year-on-year and 4% higher than the comparable pre-pandemic period in 2019 when grades were not teacher assessed. Acceptances have increased by 14% over the last ten years.
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Rising student numbers have been supported by high levels of participation among UK 18-year-olds – 37.5% of all 18-year-olds were accepted onto courses this academic cycle – as well as an increase in the size of this cohort. Undergraduate numbers from outside of the EU have also spiked in recent years, and now account for a record one in ten of all placed applicants.
China, India and Hong Kong accounted for the majority of international student numbers in the 2022 data, but applications from Nigeria have seen notable growth of 11% on the previous year. Rising demand from students travelling from outside of the EU has offset a drop in EU undergraduate numbers in the wake of Brexit. Around 11,000 undergraduates from within the EU started courses this year, 28% fewer than the comparable period in 2021 and 65% lower than in 2020.
Further growth in overall student numbers is expected in the long-term. Knight Frank analysis of ONS population projections, along with entry rates from UCAS, suggests there will be a 16% increase in total full-time undergraduate numbers between now and 2030. In real terms, this would represent an increase of 263,000 students.
Availability, affordability and deliverability
Accommodating the projected increase in students is a key challenge for the sector, both in terms of the volume of bed spaces required and the choice available to students at different price points, and will put even more pressure on university accommodation.
Analysis of the development pipeline points to 25,700 bed spaces currently under construction and expected to be delivered in time for the 2023 academic cycle. Beyond next year, there are a further 69,500 bed spaces in the pipeline with full planning permission granted. Overall, that means there are an additional 95,000 bed spaces in the planning pipeline.
Delivery is still likely to be dwarfed by recent and expected growth in student numbers. The shortfall in markets with the strongest historic growth in student numbers, like Bristol and Manchester, is increasing at a rate of over 1,000 bed spaces per year. In both markets, over the last five-years for every new bed space that has been added to supply each year, three more additional full-time students have been added to the population.
Whilst the latest data from UCAS on the distribution of accepted students shows a row back on the recent enrolment at Russell Group universities, markets with the most sought-after universities remain under supplied with purpose-built accommodation.
"New supply isn't keeping pace with increases in student numbers. There are 25,700 bed spaces currently under construction for the 2023 academic cycle, with a further 69,500 beds with full planning permission granted. Escalating and uncertain build costs, wider inflationary concerns, skills and labour shortages, financing costs, and planning policy all represent notable headwinds limiting future supply."
Delivery of the pipeline will also be challenging in the current climate. Escalating and uncertain build costs, wider inflationary concerns, skills and labour shortages, higher financing costs, and planning policy all represent notable headwinds which could limit future supply.
Any further slowdown in new delivery risks further impacting on affordability, especially given it comes at a time when the supply of rental stock in the wider private rented sector is increasingly constrained. A combination of tax and regulatory changes has put pressure on buy-to-let investors, leading a lot of them to sell up. Across the UK, there were 48% fewer homes available to rent in Q4 2022 than the three-year pre-pandemic average for the quarter.
Affordability
As with the wider housing market, the key supply-side issues for the sector are availability and affordability. The broader economic outlook for the UK does not currently point to a shift towards an environment where living costs for students and their parents will become more affordable in the short-term.
Data from our 2022 Student Accommodation Survey, undertaken in partnership with UCAS, indicates that cost and value for money remain the most important drivers for students when choosing where to live, as well as the most important factors determining whether to recommend accommodation to new students.
It its encouraging, therefore, that the survey shows PBSA is delivering the highest levels of satisfaction of all accommodation choices. Reflecting this, 80% of students currently living in privately owned and operated PBSA said they would recommend their accommodation to other students, compared with 74% of those living in a houseshare. This is higher than the same response in the 2021 Survey.
Given the narrowing of the all-in cost of accommodation between PBSA and the wider rental market, due to utilities cost inflation, it is likely that the perceived value for money experienced by students in PBSA will also increase. This will drive a greater proportion of students, in all year groups, to live in purpose-built accommodation. It is our expectation that the PBSA sector will accommodate the majority of second- and third-year students by 2030
Photo by Ivan Samkov