Newsletter Q1 UK 2018

Newsletter Q1 2018

Pronounced shortage of student housing continues

120,000

70%

100,000

65%

80,000

60,000

60%

40,000

55%

20,000

0

50%

10

11

12

13

14

15

16

17

Student count (left axis)

Student housing, no. beds (left axis)

Student-to-student housing ratio (right axis)

Note: Movements in student count and number of student housing beds versus the proportion of students accommodated in the student housing market

Sources: Statistics Denmark and Sadolin & Albæk

demands may be met by student housing is therefore expected to remain below the 70% mark in the years ahead. Price trend is driving up housing burden The general strain on the market for rental housing has hiked residential rental prices, also on student housing. In Copenhagen, the prime market rent (i.e. the market rent for first-rate housing) of traditional residential units is around DKK 1,950 per sqm p.a., but for centrally located student housing units it may well exceed DKK 2,000 per sqm as such units tend to be smaller. However, price movements in the student housing market are characterised by different dynamics than the traditional residential market. The housing demand of students is largely defined by limited purchasing power, putting a natural cap on rental prices. For a calculation example of students’ disposable income and housing burden, we have looked at the income and housing conditions of an ordinary student. We assume that the student is supported by the Danish State in terms of an education grant and loan, while also earning wages working an average

demand flats in the 30-60 sqm range. The supply of this flat size has been weak, as Copenhagen planning provisions typically stipulate a unit size of minimum 50 sqm and 95 sqm on average in residential newbuilding. However, the pipeline of new student housing seems to be improving, with 28 development schemes scheduled for completion in 2018-2020. Most developments take place in central Copenhagen locations; combined they will put a fairly large number of residential units on the market, e.g. Nordbro in the district of Nørrebro (700 units) and Kaktustårnene on the waterfront at Kalvebod Brygge (500 units). All in all, approximately 4,400 residential units are scheduled for completion over the next two years. Nevertheless, this volume is by no means sufficient to meet the demand from the existing waiting lists and the projected rise in the student count until 2020. Furthermore, we believe that the market effectively may absorb an even larger quantity of space as an added supply of affordable types of student housing will cause demand to shift back from students living at home and in small ordinary flats. The proportion of students whose housing

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