February 17th, 2021. Harry Hodell
What Does 2021 Hold for the PBSA Sector?
Lockdowns have called the stability of the PBSA sector (Purpose Built Student Accommodation) into question, but what does 2021 hold? Find out here.
On the back of a hard fought 2020, the prospect of a new sustained lockdown in 2021 caused a lot of speculation in the property sector. Considering the potential economic impact of the latest restrictions, the immediate future of the PBSA sector was called in to question – but what will 2021 hold, and do we have anything to worry about?
2020’s PBSA Predictions: Did They Come True?
The initial concerns last year regarding PBSA (purpose build student accommodation) in the UK centred around the ability for students to attend university due to travel restrictions, and whether lenders would implement a more cautious approach to lending due to doubts on the economic stability of the UK. In the short term, this meant:
- Lower LTVs
- Further geographical restrictions
- Fewer funders operating in the market
However, even then we predicted a brighter picture than you might expect.
Read: ‘Why Investment in PBSA Won’t Take a U-Turn’ (pp. 46-56)
The Facts: The PBSA Sector in 2020
We are actually looking at positive data on PBSA, despite fewer planning applications being submitted in 2020.
UCAS reported the highest confirmed number of places in September. And, as has come to be expected, there have been a significant number of foreign students applying to study on these shores. Encouraged by the weakening of the Pound sterling and the prestige of a UK education, foreign students’ appetite to study in the UK has not been hindered. The UK offers a 2-year post study visa to foreign students, one of the longest of its kind, which is undoubtedly another attractive reason for students from less economically stable regions to choose the UK for their studies.
In October 2020, UCAS reported a 30% increase in domestic applications. With an overwhelming number of students still wishing to fly the nest and find student accommodation, the outlook for PBSA remains encouraging.
Our PBSA Predictions for 2021
In some respects, the current economic climate makes studying at university an increasingly attractive option for domestic students. With economic uncertainty and unemployment on the rise, the prospect of further education is appealing. Instead of struggling with increased pressure in the jobs market (and the potential for unemployment), we predict many young people will opt to enrol in university instead.
With the fundamentals still providing a strong platform in which PBSA can continue to grow over the coming months and years, PBSA investment will be maintained, and we may also see interest from other funds looking for steady returns on their capital.
How to Succeed in PBSA in 2021 and Beyond
The funders blueprint on the previous years of PBSA development does not lend itself to successful schemes going forward, so change is needed.
In 2021 and beyond, purpose built student accommodation in the UK has to suit students who spend a much larger portion of their time living in and studying digitally. Developers who have adapted over the past year, and understand students’ expectations for high-quality yet affordable accommodation, will become the preference of lenders as the demand to the end user will be strongest here.
Kick-Start Your PBSA Project with the Right Finance
Here at Pure Structured Finance, we work closely with numerous lenders who understand PBSA development and the opportunities in this sector. We pride ourselves on understanding both your needs and the lender’s appetite, using our market expertise to match you perfectly.
If you want the freedom to focus on your project with the security of knowing the right finance has been secured, get in touch with a member of our specialist team today: call 02080 579 178.
Article By Harry Hodell
February 17th, 2021
Harry is a Director of Pure Structured Finance. He has a specialist lending background on structured investment facilities across all asset classes in UK and Europe.
After several years working for specialist lenders and operating closely with clients to deliver complex borrowing structures, Harry has now turned his focus to provide his clients with bespoke debt, equity and mezzanine facilities through a large number of specialist lenders.
The vast majority of Harry’s clients are mid-market developers, investors and funds across UK and Europe with whom he has long-standing relationships.
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