Now here's a turn-up for the books. Contrary to popular opinion – at least in the UK, US, Spain and quite a few other countries where property markets are in the doldrums – there is still one major growth area for residential investors.
Student numbers are expanding almost everywhere, and fast.
They present a rare chance for investors to get into one of the few growing areas of new development. Governments in almost all territories are increasing their student populations, both to enhance their own national skills base and to earn revenue from fees. Ironically, one of the newest growth areas is in Dubai, where the Real Estate Institute has introduced three new degree-level courses.
One major growth point within this burgeoning academic sector has been international students who leave their own country to learn in another. In the UK, some 15 per cent of all students now are from overseas and government forecasts suggest this will hit 21 per cent by 2018. Already there are 7,880 students from China applying to start university in the UK this coming autumn – a 22.7 per cent leap on 2007.
Almost every major country has seen similarly big rises in overseas student numbers but the largest growth has been across mainland Europe, thanks to a surge in young people coming from Africa and Asia. A rare exception to this global trend is the US where – with stricter visa regulations since September 11, 2001 – overseas student numbers have sharply fallen. And why do I believe all of this is important to the property world?
The answer is simple – today's students want good quality accommodation, which in turn presents good opportunities for investors. And in our current gloomy property world, that's good news.
Traditionally, there have been two ways for landlords to buy into the student accommodation sector within Europe. The first has been to buy a typical three or four bed family house and convert it to provide more bedrooms to maximise the number of rent-paying student tenants. This has long been favoured by small-scale landlords or sometimes even the parents of an individual student.
This sector has traditionally been extremely rough and ready. The housing often has been poor quality and unregulated, with income derived from it often not being declared to tax authorities. A lot of universities have encouraged the informal growth of this sector because its own accommodation for students – so-called 'halls of residence' – have been too small for growing student populations.
The second route – less popular until now but rapidly gaining favour – has been to buy into a professionally-managed, privately built student apartment block or entire 'estate' of apartments. Some property funds, which have been increasingly worried at the financial viability of mainstream residential schemes in the credit crunch, have moved into this part of the student sector for possible growth. This professionally-managed niche is still embryonic. But in the UK at least, so many universities have entered into joint ventures that four specialist developers have sprung up and are now big players.
For instance Unite, which has by far the greatest number of student bed spaces in the UK market, already provides 10 per cent of beds in London and Sheffield, nine per cent in Liverpool, eight per cent in Bristol and seven per cent in Leeds. Its rival UPP has approximately 25 per cent of bed spaces in Nottingham, 16 per cent in Plymouth, 13 per cent in Leeds, and nine per cent in Loughborough. Other companies like Opal and Liberty Living have big shares of other markets.
In well under a decade, these specialist developers now provide 130,000 student beds within the UK. Similar trends are being seen across Europe as academic institutions bring on board private builders to increase their accommodation stock.
London-based estate agent Knight Frank has created an investment 'league table' of UK places with 20,000-plus students. It has factored in the ratio of students to halls of residence, the number of foreign students requiring year-round accommodation, predicted growth in student numbers, and the proportion of students privately renting off-campus. The result is a guideline for investors to show where there is the largest mismatch of demand and supply.
Edinburgh, London, Newcastle, Manchester, Birmingham, Glasgow, Cardiff and Oxford head the list – which demonstrates that even large British cities with long-established universities are still short of accommodation. The UK's four specialist student home-builders are looking at these markets and talking to interest property funds about financing.
This just goes to show that property deals are still being done and investors are still looking for places to put their money. They're just studying the market – and finding students look a good bet at the moment.
Graham Norwood is a property correspondent for The Observer.