A-levels omnishambles will hit the housing market too
‘Potential for vastly depressed student numbers in some areas are a threat to the fragile property markets that rely on them’
At university I lived in a big house we called “the pink palace”. The jolly, bubblegum-coloured exterior gave way to typical student digs inside, with a grimy interior that hadn’t been cleaned for years.
We had little choice over where to live because the housing market was so competitive – you had to take what you could get. That’s the case in a lot of student cities where you must compete with workers who have a real income, not just ever-rising loans.
This problem is likely to be at the bottom of a long list of issues for most of this year’s cohort. The A-levels omnishambles has had a terrible effect on many groups: students, of course; their worried parents wracked with uncertainty over their children’s future; and universities, already struggling to make the sums work.
However, now, as a result of the Government’s results about-turn and the lifting of the cap on student numbers for universities, there will be another major battleground: housing.
Add to this the lack of clarity over what exactly going to university means in the next academic year. Will students even be moving into halls and digs, or will they be attending lectures and freshers’ week from a computer in their parents’ home?
We don’t yet know exactly what the changes will mean, and which universities will admit more or fewer students than planned. But we can assume those in the Russell Group will take more than they anticipated, while many lower-ranked universities will face a huge gap in student numbers.
This will have big consequences – students must be taught but they must also be housed. Colleges at Oxford University are reported to be looking at renting houses from private landlords. All this means university towns’ property markets could be divided over the quality of the institutions they serve.
Take Exeter, for example. In the past few years, the city’s skyline has been filled with a tangle of cranes, fast becoming a centre of student accommodation to meet the demand of the quickly expanding, highly ranked university. Analysis of council tax data shows that 10.5pc of chargeable homes in the city are lived in by students, according to estate agency Hamptons International. That is the second highest in the country, topped only by Nottingham.
If Exeter admits far more students than it planned due to the U-turn, it may have problems finding a home for all of them, although it is likely that many of its usually high numbers of international students will be absent, vacating some space.
Once those students move from halls to homes, they may find rising rental prices as more tenants encounter the same tightening supply. This rising local demand could take place at the same time as, as Hamptons predicts, rents increase across every region of the country, barring London.
At the other end of the scale are the cities with lower-ranking universities where student numbers may fall as a result of the about-turn. Here, investors could suffer, particularly if the housing market serves just one institution. In the past many of these areas, particularly those in the North, have been highlighted as great investment opportunities for buy-tolet landlords, chasing high yields and what was thought to be a guaranteed stream of tenants every year.
But with the chance those students may not turn up, landlords relying on these institutions for demand could face a big shortfall. They could also face high levels of competition, forced to offer lower rents to attract the smaller number of tenants.
Towns and cities that could be affected by this include Bradford, Middlesbrough, Sunderland and Grimsby, all of which serve a single, lower-ranking institution. In these areas, high yields have previously lured landlords to invest and represented one of the few places in the country that actually made financial sense for buy to let.
These northern towns are also places that could be hit hard by unemployment as the recession bites in autumn. Institutional investors who put money into purpose-built blocks of flats for students may also be worrying, although their long-term investments are far less fragile than that of a buy-to-let landlord whose income is being squeezed every which way by taxes and extra regulation.
Some of these universities had already been struggling due to tighter finances – and coronavirus hit them hard. In July, the Institute for Fiscal Studies estimated that the financial impact of the pandemic on universities would be between 7.5pc and nearly half of the sector’s income in one year, adding that around 13 institutions would likely need a bailout.
The potential for vastly depressed student numbers could deliver a fatal blow, and some could go bust, a threat to the fragile property markets that rely on them.
Uncertainty abounds – not least among the students who have been messed around by algorithms and false promises. But the effects of this will ripple out and continue to deepen the divide between the haves and the have-nots.
Popular university cities such as Exeter, left, may see higher demand for property rentals, which will add an extra burden to student life