Oct
22

Student HMO market in ‘rude health’ as pandemic weakens PBSA rivals

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The fast growth in purpose-built student accommodation (PBSA) is unlikely to displace HMO stock, which continues to attract the bulk of the student market, according to new research.

StuRents, which manages some 160,000 properties nationwide, estimates that there are 870,000 HMO beds in the UK, making up 70% of all private stock or 55% of all accommodation, which has proved particularly resilient during Covid.

It reports that enquiries from domestic students for HMOs followed the usual seasonal trend, while uncertainty around international travel, proposed teaching methods, and the pandemic resulted in a slow lettings cycle for PBSA – which tends to attract more international students.

StuRents’ annual report on the sector shows that the average weekly cost of an HMO bed increased by 3.4% year-on-year to £104 compared with a PBSA bed which increased by 0.2% to £158.

calum macinnes student rentals

Calum MacInnes (pictured), founder of Student Tribe, says it doesn’t foresee PBSA stealing significant market share.

“Even if the PBSA players were to cut their prices, the desire of the domestic student to live with their mates in an environment which resembles the security of home life but with the excitement of being with your friends, who either live with you or near you, is an intoxicating mix,” says MacInnes.

The most important driver for investment into PBSA has been the unrelenting growth in Chinese students.

StuRent believes the biggest risk for PBSA operators is a decline in demand and notes the slowing annual rate of growth; in 2019 the number of Chinese students studying abroad grew by 6.3% compared to sustained double-digit growth a decade earlier.

Planning application activity across the UK has also slowed since 2016. In the first seven months of 2021, fewer than 15,000 PBSA beds were put forward compared with 32,000 for the same period in 2017. Activity in Coventry and Cardiff for example, has all but dried up, a sign that investors have moved on from these locations.

Read more: Ultimate guide to student landlording.

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