* London student numbers fall on fee hikes, visa curbs
* Investors, developers hit by rise in vacant rooms
* May force developers to exit market, lower rents
By Brenda Goh
LONDON, Nov 5 Driving lessons and iPads are
among the gifts developers are showering on students in London
to lure them to fill empty rooms after fee hikes and visa curbs
threaten to undermine university housing's reputation as a safe
Carlyle Group's Pure Student Living and Quintain
Estates are among developers who have struggled to fill
student rooms in London this year after the British government
tripled maximum university fees to 9,000 pounds ($14,400),
triggering a 12 percent fall in numbers from Britain and the EU.
Tighter restrictions on the number of non-EU students in
Britain have further dampened demand, property experts say.
"There's an empty room in my flat right now and there are
empty flats in the building," said Varala Maraj, a 20-year-old
student from Trinidad and Tobago who in September moved into a
five-bedroom flat in a 20-storey block of apartments in Wembley,
north London, owned by Irish developer O'Flynn Group.
"They started an iPad promotion when they wanted to rent
rooms and they still have rooms available," she said. "I wasn't
given one because I applied before the promotion."
While investors have been wary of offices and shops outside
the most profitable locations in Britain, investment in student
housing has risen from 350 million pounds in 2009 to some two
billion pounds in the first nine months of 2012, data from CBRE
Group showed. Investors are attracted by high occupancy
rates and stable income streams.
Almost half that investment has targeted London, home to
top-ranked universities with a large foreign student population,
many of whom are willing to pay for higher-end accommodation.
Deals this year include Blackstone's sale of its Nido
student housing portfolio to private equity firm Round Hill
Capital for 415 million pounds, and Barclay's sale of a
stake in University Partnerships Programme to Dutch pension fund
manager PGGM for an estimated 840 million pounds.
In September, the sovereign wealth fund Government of
Singapore Investment Corporation set up a joint venture with
student housing specialist Unite Group to target one
billion pounds of London property.
Britain is Europe's biggest market by number of
purpose-built student blocks with almost 200,000 beds, placing
it far ahead o f France and Spain, which have a handful of
similar schemes, property consultant Jones Lang LaSalle
Private student housing competes with university halls and
the general rental market for students. Rents in London private
student housing increased by 7.2 percent between the 2011/12 and
2012/13 school years to an average of 232 pounds per week,
almost 40 percent higher than rents in the universities' own
accommodation, consultant DTZ said.
For the extra money, perks include flat screen TVs, gated
security, Egyptian cotton towels and vending machines that sell
Hardest hit by waning demand are rooms priced between 200 to
300 pounds per week, which DTZ said account for almost half the
21,897 student rooms in London. Pricier rooms were still being
snapped up because of resilient demand from wealthy
international students while cheaper property was faring bet t er.
"Normally by now everybody's full," said JLL's head of
student housing Philip Hillman. "But there are some student
housing developments in London that are not at the occupancy
that you might have expected."
It may force new entrants to the sector to think twice about
whether they stay, said I an Scott, manager of Quintain's
iQ student accommodation fund.
"We've had a number of people come into the market who are
not specialists that have come in because it's a hot sector. It
may encourage some of the peripheral guys to back out."
Some banks began to do just that last year. Lenders
including Barclays and the Royal Bank of Scotland
cooled on lending to developers over fees and visa
As well as gifts, other developers, such as specialist
British-based student developer Mansion Group, have offered four
weeks free rent. It is also offering 12 free driving lessons and
is accepting less financially secure short-term tenancies.
"If developers are having to give that rent away, and if you
put that into their calculations, then the capital value will
have to fall," said Investec property analyst John Cahill.
"And if the valuation of the assets fall then it's less
appealing to investors than it was before."
Developers may have little choice but to drop rents next
year, particularly in light of the tougher financial climate,
said Alan Artus, director of student housing developer
Generation Estates, which runs Pure Student Living for Carlyle.
"It's inevitable that a more conservative approach to rent
setting will be in evidence," he said.
Others expect the government to relax its stance over the
visa curbs and that students will accept the fee hikes.
"Things suggest that it's more of a blip than a long term
thing but there are some headwinds before numbers resume to
normal service over the next couple of years," said Richard
Simpson, Unite Group 's managing director of property.
"There has been so much talk about what a wonderful sector
student housing is," Hillman said. "This is a little reality
check for some parties."