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More Singapore companies are turning to student accommodation due to the relative independence of the property sub-sector from factors that drive returns in other real estate types such as offices and malls, reported Nikkei Asian Review.
Citing London-based Real Capital Analytics, the South China Morning Post earlier revealed that Singapore had emerged as the top foreign investor in US student housing from 2016 to 2018.
Singapore Press Holdings was among the Singapore companies that have recently ventured in student accommodation after it acquired 14 purpose-built student accommodation properties in the UK for £180.5 million (S$320 million) in September. Far East Orchard also purchased three UK properties for £55 million (S$97.5 million) last week.
Other prominent Singapore investors in student accommodation include Mapletree Investments and sovereign wealth fund GIC.
Explaining the company’s interest in student accommodation, Far East Orchard Group CEO Lui Chong Chee said the UK purpose-built student housing sector has a track record of strong rental and occupancy growth that is unrelated to the overall economy.
He noted that universities in the UK usually partner with student housing operators by securing accommodation for new students and providing referrals – providing investors a more predictable revenue stream as well as occupancy rates.
While student accommodation properties offer higher returns than standard apartments, malls and offices, the risks have also grown.
This comes as existing student accommodation are now being offered at a premium to standalone properties – mirroring the robust demand from large institutions looking to scale up quickly.
Investors looking to enter the sector for the first time are possibly late in the game, and the risk of government intervention has to be considered also, said Kevin Gin, director of fund manager Alpha Capital.
“You can’t price gouge students unlike with occupants of luxury apartments…The Western world is becoming more socialist so regulatory issues are likely to arise,” he said.
Centurion Corp CEO Kong Chee Min said investors also have to understand individual markets as conditions could vary. The UK and US, for instance, are mature markets with existing student housing properties that can be acquired, while new entrants to the Australian market will need to develop and manage properties of their own.
The Singapore-based company entered the student housing market five years ago and currently owns properties in the UK, Australia, the US, South Korea and Singapore.
Looking ahead, Priyaranjan Kumar, regional director of Cushman & Wakefield’s Asia Pacific capital markets group said investors will need to pay more attention to the design as well as management of properties for students in order to extract higher returns.
“Like with hotels, you want to be with a strong operator because you need to fill the rooms,” he said.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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