The situation on the German housing market is strained. In view of the lack of places in student residences students are forced to compete for “regular” housing with tenants who are in gainful employment. At the same time, rents have risen sharply in recent years in many cities, including many university cities. This trend hits students particularly severely. From the year 2010 to 2015, the average rent paid in the thirty biggest university cities in Germany increased by over 16 per cent. The average increase in income for students in the same period only amounted to 7 per cent (Source: Analyse: Studentisches Wohnen, June 2015, Savills).
How great is the shortfall in the supply of accommodation?
The rising demand and the shortage of accommodation for students result in a substantial supply gap for student accommodation in Germany. Until 2017 the Deutsche Studentenwerk calls for 45.000 additional places in student residences. In view of present-day accommodation requirements, this first and foremost concerns high-quality yet affordable accommodation. In the medium price segment of rents ranging from 300 to 450 euros, the supply quota is as low as 5 percent. Even when taking account of the student residences currently planned and under construction, only an increase to 6 percent is projected (Source: Analyse: Studentisches Wohnen, June 2015, Savills). This supply gap creates an attractive opening for both private and institutional investors to invest in infrastructure and education alike.
How great is investor interest in student housing as an asset class?
Student housing has become established as an attractive asset class in many markets in recent years. In the UK, the investment volume in 2013 totalled just under 2 billion pounds. The average yield was just over 6 per cent. (Source: Spotlight: UK Student Housing, summer 2013, Savills).
Investors are increasingly discovering the German market, too. At the end of 2014, local developers sold student housing complexes in Hamburg and Göttingen to institutional investors representing a total transaction volume of 44.2 million euros, for example. Similar transactions took place in Munich and Dresden. International investment companies or insurance companies are commonly involved in such transactions, as they see this asset class as offering a means of diversifying their portfolios and exploiting new yield potential.