With a steady increase in the number of students since the 1980s and a housing supply that is struggling to keep up, public authorities only cover around 15% of student housing needs. To compensate for this deficit, they encourage investors to intervene in the market by offering tax advantages...
Before 2009, senior residences were part of a special co-ownership regime. Shared charges were considered co-ownership charges, which imposed a significant financial burden on both occupants and owners. Since then, the services consumed have been distinguished from co-ownership charges, thus improving profitability for investors.
Student Residences...!
The valuation of a student residence is based on several factors, including its geographical location, the services it offers and the rents charged. With a constant increase in the number of students since the 1980s and a housing supply that is struggling to keep up, public authorities only cover around 15% of student housing needs.
To compensate for this deficit, they encourage investors to intervene in the market by offering tax advantages. The scarcity of housing available on the student market leads to an increase in the value of residences, while potential returns for investors tend to decrease.
This situation results from the high demand for this type of housing, which translates into an almost complete occupancy rate of student residences. For investors, this high demand and the high occupancy rate offer a certain security, even if this is reflected in relatively lower returns compared to other types of investments.
What are the different types of “Student Residences” ?
• Private Residences: Offer full services with attractive returns, targeting students seeking additional comfort and amenities.
• University Residences: Managed by universities, these residences benefit from strong institutional demand and very low vacancy rates.
• Mixed Residences: Partnerships between academic institutions and private companies, offering sustained demand thanks to institutional agreements.
• Low-Cost Residences: Targeting low-income students, these residences benefit from public support and strong demand for affordable housing.
• Thematic Residences: Designed around specific themes (sports, arts, technology), they attract students with particular interests.
• Luxury Residences: Targeting international students and those from wealthy families, they offer high-end services and high returns.
What are the attributes that characterize the “Student Residences” asset ?
• Location: Student residences are ideally located near universities, colleges, and other academic institutions, making it easy for students to get around. Proximity to metro stations, buses, and other public transportation is crucial for students who often rely on these services. Located in vibrant urban areas, with easy access to amenities such as cafes, restaurants, bookstores, and recreation centers.
• Housing Type: Includes single rooms, studios, shared apartments, and sometimes shared accommodation. Accommodation is often furnished and equipped with basic amenities such as a bed, desk, storage, and kitchenette.
• Services and Facilities: Residences often offer additional services such as high-speed Internet access, cleaning, 24/7 security, and concierge services. Shared living spaces, study rooms, libraries, gyms, communal kitchens, relaxation and recreation areas. Organising social and cultural events to encourage integration and community among residents.
• Demand and Occupancy: Student residences generally have very low vacancy rates, due to the high demand for student accommodation. Rental cycles are aligned with the academic year, with leases lasting 9 to 12 months.
• Financial Characteristics: Student residences often offer attractive returns due to relatively high rental rates and consistent demand. Operating costs can be moderate, but included services may incur additional charges. Rental income is stable due to rental contracts aligned with the academic year.
• Management and Maintenance: Often managed by companies specialising in student residence management, ensuring efficient administration and regular maintenance. Regular upkeep and maintenance of communal and private facilities are essential to maintaining the quality of life of residents.
• Regulations and Compliance: Compliance with strict fire safety, surveillance and accessibility standards. Compliance with local zoning and student housing regulations. Obtaining the necessary permits to operate as a student residence.
• Appreciation Potential: Student residences generally benefit from the continued growth of the student population, including international students. Impact of urban development projects and improvements to surrounding infrastructure on the valuation of the asset.
• Environmental Attractiveness: Adoption of sustainable practices, such as the use of renewable energy, water management systems, and certified buildings (LEED, HQE). Presence of green spaces and facilities that promote the well-being of residents.
• Residential Experience: Creation of a favorable community environment, with initiatives aimed at promoting social engagement and student well-being. Availability of support services for students, such as academic advising, personal and professional development workshops.
What do investors expect ?
Investing in student housing has many advantages, and several specific criteria attract investors to this type of real estate asset. Here are the main criteria of interest:
• Attractive Yield: Student housing often offers high gross yields compared to other types of real estate assets due to the high rental demand and relatively high rents. Regular and stable rental payments from students ensure a positive and constant cash flow.
• Constant and Growing Demand: The continued growth of the student population, including international students, ensures a sustained demand for student housing. In many large university cities, student housing is often in a waiting list situation, which minimizes the risk of vacancy.
• Low Vacancy Rate: Vacancy rates in student housing are generally very low due to the high demand for housing near university campuses. Students typically stay in residences for periods of 9-12 months, ensuring stable occupancy.
• Management and Maintenance Costs: Student residences can be simpler to manage due to standardised leases and predictable tenant turnover. Maintenance costs are often shared with students via service charges, and modern residences typically require fewer major repairs.
• Portfolio Diversification: Investing in student residences allows investors to diversify their property portfolio, reducing risk by not being reliant on a single asset type. The student accommodation sector tends to be resilient to economic fluctuations as demand for education remains stable.
• Affordability: The acquisition costs of individual units in student residences can be lower than those of traditional residential apartments, making this investment accessible to a wider range of investors. Banks are often willing to finance the purchase of student housing properties due to their low risk and stable returns.
• Valuation Potential: The value of student housing properties can increase over time, especially in areas where demand for student housing continues to grow. Adding additional services or upgrading facilities can increase the value of the property and attract more tenants.
• Flexibility of Use: Investors can choose between managing the residences directly or hiring professional managers to maximize profitability. Student housing properties can easily be adapted to meet the changing needs of students, such as adding co-living or co-working spaces.
• Regulatory and Tax Considerations: In many regions, student housing properties benefit from favorable regulations that facilitate their development and management. Some tax regimes offer specific advantages for student housing investments, such as tax deductions on rental income or tax reductions for investors.
• Environmental and Technological Impact: Integrating green and sustainable technologies, such as renewable energy and water management systems, can attract environmentally conscious tenants and increase the value of residences. Adopting smart living technologies can improve the efficiency of residence management and offer additional services to students, thereby increasing rental income.
What are the main evaluation criteria for student residences ?
The valuation of a student residence differs depending on whether it is a property in a future state of completion or already built. In both cases, the valuation methods used include income capitalization and direct comparison. However, for a property already built, the activity reports of its operation are also taken into account in the valuation process.
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