"The issues around affordability make it clear there is a growing requirement for small-scale, low amenity student housing targeted at domestic and price-sensitive international students."
Avamore Capital has expanded its lending appetite and will now support transactions in the student accommodation sector across the UK.
After eight years of operations, the development lender which covers the whole of England and Wales, has lent over £600m across its four core products - development, refurbishment, part complete development and bridging.
Avamore looked into currently underserved markets to support, having done this previously with its introduction of the Finish & Exit product in 2019. Now labelled as Part Complete Development, the product looks to support projects which needed refinancing at any stage, alleviating the pressure felt by developers at the time from increased cost overruns and construction delays.
From looking at ways to better serve the market, they found that the current student-to-bed ration in the UK is 2.3:1 reflecting a chronic supply and demand imbalance. The UK is currently home to 2.1 million full-time students and forecasts continue to predict strong growth in the number of domestic and foreign students applying for universities.
At a time when planning for new units has slowed due to declining site availability, alternative use cases and oversupply in certain locations means future supply growth is likely to remain low by historical standards.
Affordability of accommodation is also a major factor for most students, particularly for domestic students, the majority of whom utilise a maintenance loan to cover the cost. There are several cities in which the PBSA market is entirely out of reach for the average domestic student, and without additional income or financial support from family, there is a limited pool of housing available.
Avamore’s chief lending officer, Philip Gould, commented: “Going forward, the forecast slowdown in planning and delivery of new beds, combined with rising student numbers, means the broad macro trend is favourable for developers and investors.
"The issues around affordability make it clear there is a growing requirement for small-scale, low amenity student housing targeted at domestic and price-sensitive international students. We have determined that this requirement can be serviced by the refurbishment of existing 1st generation PBSA stock and the repurposing and retrofitting of existing office/commercial stock, which fits extremely well with Avamore’s extensive experience in heavy residential refurbishments and office-to-resi PD conversions.
“We look forward to increasing our presence in the student accommodation sector and have ambitious plans to further improve how we can help developers through continued product innovation to give our brokers and borrowers the support they need.”
