Nobody expected University applications to rise after the government enabled institutions across England to increase their fees three fold but is it something for student property investors to worry about?

A lot of the media hype over the previous months would have you think so; however if the figures are examined with a little more detail it doesn’t seem as dismal as the headlines may first lead us to believe.

The headline drop in applications is 7.4%; but if you bear in mind that a record number of applicants, 379,411, were accepted into University in 2011 and there have been 540,073 applicants so far in 2012, it’s hard to believe that many University places will not be filled for the next academic year (source UCAS press release January 2012).

It’s also worth noting that those A-Level students receiving their results in the summer of 2010 were far less likely to defer entry to University to take a gap year in order to benefit from the lower tuition fees therefore skewing both the 2010 and 2011 figures. A similar blip was seen in 2006 when fees were last allowed to increase by the Labour Government; there was a 3% drop in home UK applications followed by an upswing of 5% the following year. Although the increase in fees is more significant this time around there is no reason to believe that the trend will not follow.

There may be reason to be more concerned for individual institutions who have seen more significant drops in applications; in the cities we operate in (Birmingham, Bristol, Nottingham), the more significant drops in applications have been for the new universities such as Nottingham Trent University with a 17% drop or The University of West of England with a 13% drop; it’s clear that the fee hike has created more competition amongst the institutions but with application rates still substantially higher than the number of places available it doesn’t seem likely that the number of accepted places will fall.

There are concerns that students may want to pay lower rents due to the increased cost of attending University however there is no evidence of this happening during the previous fee structure overhaul in 2006 and for most students the money they will have in their pockets when they are looking for properties will be the same, if not higher.

The real unknown is how many students will opt to stay at home to save money and withdraw from the private rented sector altogether. Although some studies have been conducted it’s very difficult to know how many students will take this option until the start of the next academic year in September.

Landlords and property investors should take some comfort in knowledge that Universities across England have stated that they anticipate the number of overseas students applying to increase by an average of 3-6%, with some even stating they see income from this group to go up by 100% by 2013-14 (source: CBRE 2011 Q4 Student Sector Review).

What is clear is that student accommodation currently continues to deliver strong returns compared to other mainstream asset classes. With the increased cost to attend university and likely transformation of student mindset to consumer mindset, well-informed providers of high quality, good value student accommodation will still have great opportunities to expand their business in coming years

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