Newsletter Q1 UK 2018

Newsletter Q1 2018

Nevertheless, the spread between yields on student housing and traditional residential investment property has been narrowing in the last couple of years, and we expect it to become even less pronounced as the market matures and attracts renewed investor interest. We see several European investment markets where the yield spread has been virtually eliminated. In Denmark, investor activity is spearheaded by multiple domestic pension funds, including PFA, Danica and AP, but also several funds, e.g. Rockspring and Koncenton. We believe that fund-based foreign investments will dominate the investment market for student housing in 2018 because of the prospects of attractive risk-adjusted returns, driven mainly by the spread vis-à-vis yield requirements on traditional residential investments as well as the availability of favourable financing conditions. Irrespective of an increase in supply and a projected decline in the student count longer term, we still maintain that student housing represents an attractive alternative investment opportunity in the residential segment. However, historically, planning requirements for this type of dwelling have been fairly lax, resulting in low-quality buildings being constructed at inferior micro-locations. These buildings are at risk of being outperformed as the supply of new types of student housing picks up. From an investment perspective, it is therefore important to factor in the demand situation in a period that stretches beyond the next five years ahead. Read more: In Aarhus, too, the development in the student count has great bearing on housing demand. Read our analysis of the Aarhus residential market here.

Good to know

In Denmark, student housing is only rarely concentrated on campus or next to the grounds and buildings of a university, college or school. Instead, students can rent a room either in a student hall of residence (“kollegium”) or in a privately owned house or flat. Some students share a privately rented flat. Alternatively, students may rent a room or flat in student housing complexes, owned by a property investor, e.g. a pension fund. In Copenhagen, the waiting lists for student hall rooms (which are typically the least expensive) are administered by KKIK (Student and Youth Accommodation Office Copenhagen) and CIU (Centralindstillingsudvalget).

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