Of considerable value is that the report encompasses all accommodation options for students, with the exception of living at home. Encompassing purpose-built student accommodation (PBSA), both privately and university managed, as well as privately owned houses and flats, it can reach conclusions on the drivers of the demand for each.
Providing context to the findings, the report identifies that the students surveyed are paying an average of GBP7,865 (US$9,938.61) per annum for private PBSA (circa GBP150 (US$189.55) per week) and GBP6,160 (US$7,784.08) per annum for university managed PBSA (circa GBP120 (US$151.64) per week), with privately rented houses in the middle at GBP6,860 (US$8,668.64) per annum (circa GBP130 (US$164.27) per week). While the price differential between privately and university operated PBSA is most presumably due to differing levels of amenity provision and the desire to make a profit, the circa GBP20 (US$25.27) discount per week for private houses compared with private PBSA will be eroded in part once utility bills are added.
Today’s students have grown up in the experiential economy, with a far greater focus on what effect goods and services will have on them as the consumer. Motivated not least by the graduate job market seemingly ever-increasingly competitive, students are principally focused on investing in an accommodation environment that gives them the best chance to succeed in their studies, conscious that their own wellbeing will have a significant impact on this.
Asked what they would be willing to pay extra for, more than 40% of students identified faster wi-fi, a larger bedroom, an onsite gym and 24-hour security. Meanwhile, less than 20% of students would pay more for a cinema room, gaming room or free bike hire. And while environmental considerations are an important motivator, it also falls in the lowest bracket, with less than 20% of students willing to pay a premium for this.
Identifying what is important in supporting student wellbeing, good quality communal space within the accommodation ranked highly, but the remainder of the top five were focused on non-physical aspects, including organized common-interest clubs whether that be climbing, gaming or reading, social events to reduce loneliness and practical skill workshops such as dealing with finance issues and healthy living.
However, in striking contrast to this was the impact that the cost of living crisis is having on students. The average cost of accommodation shared above conceals a wide range of prices paid, for while motivations for sharing privately owned houses included the ability to live with friends and having more freedom, 97% of those who moved from PBSA to a private house identified the lower cost as being a motivator.
Rather alarmingly, nearly one in eight students reported that they were likely to drop out of university this year due to the high cost of living. Affordability is a significant issue.
At 2.2 million, there is already a record number of full-time students in the UK, up a remarkable 26% over the last decade. And with the Higher Education Statistics Agency reporting that the record number of 760,000 applicants in 2022 could reach one million per annum by 2030, occupational demand is accelerating. Combined with an already undersupplied student housing market and new completions not getting close to keeping up with additional students each year and the pressure is continuing to build.
My conclusion from this is that while many students will be shopping around comparing wi-fi speeds and how comprehensive the gym equipment is, there will likely be even more students for whom clean, safe and, imperatively, cheap accommodation will be essential. While it is tempting to focus solely on the amenity-rich PBSA assets, I would not dismiss less shiny investment opportunities that cater for those on a budget.
Written by Philip Churchill, first published in Islamic Finance news Volume 20, Issue 20 dated 17th May 2023.