What do the latest undergraduate application trends mean for Purpose-Build Student Accommodation?
January 27, 2023 5 Minute Read
The latest data from UCAS provides a full picture of undergraduate applications and acceptances for the current academic year and demonstrates the continued strength of demand for higher education. Total applicants are at record levels, up 2% on the previous year, and while acceptances are only up marginally (0.2% increase since 2021), they are the second highest in ten years. This demonstrates the strength of demand for higher education in the UK. The latest data release reinforces the fact that supply does not keep pace and demand continues to be amplified by the demographic and participation rate growth in the domestic 18-year-old population (14% increase in applications since 2020), and growth in international demand for higher education.
The UK is a major study destination and currently, international students make up 17.5% of the UK’s full-time undergraduate student population. Undergraduate applications from non-EU students have grown 13.5% over the past year and 80% in the last ten years, further driven by the 2020 changes in post-study visa regulations. Since the Brexit changes to tuition fees in 2021, EU student acceptances declined by 4,405 YoY, but this has been backfilled by the 8,170 increase in non-EU student acceptances in the same time frame. The most robust international markets were China, India, and Nigeria with 13%, 43%, and 33% increases (respectively) in acceptances YoY.
Only medium and lower tariff universities have increased their undergraduate acceptances in 2022/23, a significant shift in historic trend. Higher tariff provider acceptances declined by 15,000 YoY, and 100% of this decline was in domestic students. Furthermore, this is the first drop in intake for higher tariff providers in the last ten years. It is likely that higher tariff providers have had to limit their intake from over-recruitment in 2020 and 2021, during the pandemic when predicted grades were used as a proxy for A-level exams. But this may also be impacted by the declining real term value of undergraduate domestic student tuition fees to universities. The number of international student acceptances at higher tariff providers remained consistent with previous years. International student fees contribute towards filling the funding gap that the domestic tuition fee freeze has created in recent years so this is to be expected. International students are a key occupier of PBSA due to the high specification and turnkey nature of the product. This ease of occupation benefits students who are arriving from a different country for the first time, who may be unfamiliar with how to secure an HMO or private rental, and are typically used to higher standards of accommodation. This consistency in acceptances from higher tariff providers coupled with the increased number of this cohort across the UK will continue to feed demand for PBSA.
Increasing numbers of acceptances by lower and medium tariff providers could mean an increase in the diversity of markets with opportunities for PBSA development over time if this trend persists.
While development conditions become tougher (including planning, viability, and construction costs), and operational costs increase due to inflation, supply will continue to be constrained and be surpassed by demand significantly. More PBSA beds are needed to keep up with growing demand from the continued growth of the UK full-time student population. These supply and demand conditions have also led to higher occupancy levels amongst existing operational PBSA encouraging strong rental growth further reinforcing the attractive nature of the sector to investors.
Sources: HESA Student Population Data 2020/21, UCAS End of Cycle Data December 2022
Senior Analyst, Valuation & Advisory Student Accommodation Analytics
Director, Valuation & Advisory Student Accommodation Analytics