Funding student housing in United Kingdom

A Chinese couple talk with an overseas property representative at a recent real estate fair in Beijing. [Photo/China Daily]

Yao Meng, a finance graduate from a college in Manchest, UK who graduated in 2012 (study period 2010-2012, three-year undergraduate), returned to Shanghai to work as a financial analyst in 2012. With four years' of experience of investment and market analysis under her belt, she is convinced Manchester, the city hosts her Alma Mater, now makes for a potential investment destination.

She will visit the English city soon to check out a planned new project for student accommodation. She would also like to see for herself changes, if any, in the student housing market since she left the city in 2012.

"Back then, it was really difficult to find a decent place to live. Students' budgets are often quite limited. Housing supply was also short, so rent was expensive. I moved three times during my two-year stay. It was so time-consuming and tiring," said Meng.

If Manchester enthuses her now, Meng will invest up to 120,000 sterling pounds ($159,320) of her savings in the project, and hope to reap an anticipated annual yield of more than 7 percent.

"My experience as a student tells me that good-quality yet affordable exclusive housing projects would be welcomed by international students whose number is growing by the year. Housing that is better than dormitories and more affordable than rented apartments is likely to be popular among students," said Meng.

A research note from Knight Frank said the market is one of the most investible block trading categories that attracted a record 183 million sterling pounds in investments in 2014 and more than 500 million sterling pounds in 2015.

Even sovereign wealth funds and funds for high networth individuals or HNIs are investing, said the note.

Not just in the UK but Australia as well. "Education is one of Australia's largest exports just behind mining and commodities, and the number of international students continues to rise. Thus, it's not surprising to see more capital chasing student housing," said Elsa Yep, a Sydney-based realty agent.

A Chinese couple consults with a property agent from Australia at a real estate fair in Beijing. [Photo/China Daily]

Students such as Zhang Ling, 23, who is majoring in business in a London college, love exclusive housing projects because they are more "cost-effective", convenient and provide a venue to meet more people. Her single room of 16 square meters costs 180 sterling pounds per week.

"First, the location is central, compared to my previous suburban houses, which means more safety during the night hours. Second, it has all the facilities you need, including restaurant, laundry, entertainment, which saves a lot of time that can be used for study or to do more part-time work. Third, you meet students from more than just one college, so you can mingle with people and build up networks," she said.

Also, booking for such rooms is flexible, giving even students who enroll for summer school programs and exchange programs more choices than staying with host families.

Researchers said investors, both individual and institutional, need to consider demand, pricing and valuation of projects before they part with their money.

Student housing projects are long-term investments, not for speculative purposes or quick return hunters. They call for quality management and stable market demand to generate handsome returns. Risks include variables like changing ranks of institutions, safety in the city or region, and visa and migration policies.

But, in the long run, student accommodation projects in prestigious locations and with outstanding management will emerge as the most investible categories, said a research note from Savills.