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’

The Daily Telegraph - Business - - Business Comment - Is­abelle fraser

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

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