Student housing investment volume increases to EUR 430 million in 2021
3 februari 2022
An approximate total of EUR 430 million was invested in student housing in 2021. This represents a growth of 35% compared to the investment volume in 2020. Research by Capital Value shows that approximately 90% was invested in new build. Despite the growth, expectations are that the volume in this sector will remain stable in the coming years. This is primarily due to the lack of new-build plans and a low willingness to sell among investors. The Netherlands is currently facing a shortage of 26,500 student accommodations*. If the number of new-build projects in the pipeline is not further increased, this deficit could grow to 50,000 by 2025. Investors currently have extensive funds available for investments in this sector. Capital Value researched the market and mapped out the opportunities for investors in each region of the Netherlands.
Major student housing shortage, initial yields under increasing pressure
Purpose-built student accommodation (PBSA) is in short supply in the Netherlands, both in terms of quantity and of quality. The number of international students coming to the Netherlands is growing significantly: between 2017 and 2021, the international student population increased by 49%, exceeding 110,000. As a result of the market shortage, the number of active investors in this sector is on the rise. The growing interest in student housing is causing a drop in net initial yields to less than 4.0%. The new investors who entered this market in recent years are primarily international investors.
More than 80% of student housing sold to international investors
Of the total investment volume in 2021, 81% was added to the portfolios of international investors. For many years, the PBSA market in the Netherlands was dominated by housing associations and private investors. However, due the rapidly growing demand, international investors have come to play an increasingly large role. International investors who entered the Dutch PBSA market during the last 10 years include Round Hill Capital, Greystar, Catella, International Campus, Xior and The Student Hotel.
A lot of capital has been invested in new-build PBSA in recent years, particularly by international investors. However, the market demand still offers room to add new PBSA properties to the existing stock. This was demonstrated by a provision rate analysis conducted by Capital Value. The provision rate represents the percentage of the student population living in PBSA properties. The provision rate in the Netherlands is 14%, meaning that the number of students is seven times higher than the number of available accommodations. Compared to more mature PBSA markets, this is a low rate: the United Kingdom and Sweden have provision rates above 20%. In its research, Capital Value mapped out the PBSA stock in all university cities in the Netherlands. This revealed that the provision rate varies strongly between cities. In Ede/Wageningen, for example, it is relatively high (36%), while Enschede scores very low (5%).
International students: an important part of the Dutch knowledge-based economy
International students have long played an important role in the Dutch knowledge economy. However, the lack of appropriate accommodations may cause the number of international students coming to the Netherlands to stagnate, resulting in missed opportunities for both the students in question and the Dutch knowledge-based economy: more than half of all international students consider staying and working in the Netherlands after completing their studies**. These international graduates are of crucial value to the labour market, which is increasingly experiencing shortages.
Student housing shortage to continue growing in coming years
Due to a variety of factors, the PBSA shortage will continue to increase for the foreseeable future. With the government's decision to reintroduce basic student financing (the so-called basisbeurs), demand for accommodations among Dutch students will further increase. The introduction of the student loan system in 2016 led to a reduction in the proportion of Dutch students living away from their parents' homes from 55% to 48%. If the number of Dutch students living away from home returns to the previous level of 55% as a result of the reintroduction of basic student financing, this could cause demand to increase by approx. 50,000 students. Furthermore, Brexit has increased study costs in the UK, meaning that more students from EU countries will choose to study in the Netherlands instead of in the UK. It is also expected that the addition of new student accommodations from the existing housing stock will be limited, as more and more municipalities are taking measures to prevent the conversion of properties into separate rooms and apartments.
Insights into the total PBSA stock in the Netherlands will help enable better evaluations of regional student housing markets. Expectations are that the shortages will grow most rapidly in student cities that are home to universities, as the number of international students is growing faster in universities than in universities of applied sciences (in Dutch: hogescholen). However, there remain a great many investment opportunities in Dutch cities that only have universities of applied sciences, as these areas often lack high-quality independent residential units. Furthermore, initial yields are often higher in these student cities than in cities with universities.
According to Wimjan van de Wiel, real estate advisor and student housing specialist at Capital Value: "The housing of students, both Dutch and international, is an important factor in the growth of the Dutch knowledge economy. It is very important to continue investing sufficiently in student accommodation over the coming years. Our research provides both developers and investors with insight into the opportunities in each region. Only through effective collaboration between market parties can we ensure, together, that sufficient student accommodations are added in the areas where they are most needed."
More information about our research regarding the PBSA investment market?
Please contact Wimjan van de Wiel, student housing specialist, w dot vandewiel at capitalvalue dot nl
* Source: Kences
** Source: Nuffic