Why Does SA Pick Student Housing for Investment?

December 2, 2020

Why Does SA Pick Student Housing for Investment?

Candy Ong
Head of Investment
Shareable Asset

Why Does SA Pick Student Housing for Investment?

Real estate investment typically is one of the favourites among the high networth individuals and institutions to invest in. A lot of investment firms and family offices will have allocation set aside for real estate investment as it is deemed to be generating stable income, easy to understand with great familiarity and long horizon holding position.

Usually such investment, minimum investment for individuals would be at least SGD$200,000 to SGD$1,000,000 and institutions would be millions and up. However, for the mass market investors, buying your first HDB (housing development board) unit or getting an EC (executive condominium), most would require to maximize their loan credits and use part of their CPF (central provident fund) to finance and pay for the down payment. The few only options would be waiting for capital appreciation on their current house but this would also usually mean their next house purchase would be more expensive or they invest in REITs. This is due to the high capital outlay especially buying a property in Singapore. For certain investors, another common method would be making a conceptual approach of co-ownership of physical asset such as real estate property with family and friends they trust, and they share the rental income and expenses based on ownership percentage.

Thus real estate investment is not accessible to mass market retail investors at all. With Shareable Asset (SA) being the first to hold the Capital Market Services license using blockchain to tokenize real estate investment, we are able to provide access to all levels of investors at a much lower cost. Therefore we are able to bring such unprecedented investment opportunities to any investors with low entry investment size to experience and start owning fractional ownership of real estate property, as well as making the traditional co-owing concept done among families and friends onto a licensed platform, reaching out to global investors with much lower capital outlay.

For a start, we pick purpose built student accommodation property (PBSA) in the UK for our investors to invest in. This is because PBSA is a very popular asset class to invest in the UK due to rising demand. Top property management firms like Savills, JLL and other big fund management companies known in Singapore such as GIC, Temasek and more have been actively investing in this particular asset class for years. Even in times of ongoing covid-19 outbreak, big players have been investing very actively in the UK student housing.

JLL released a report in 2019 [1] stating that university owned beds now account for less than 50% of all PBSA supply in the UK for the first time. Of the 331,000 privately owned beds, just under 91,000 are leased to universities or have a nomination agreement in place. The remaining 241,000 are direct let. This represents an increase of 148,400 in the total number of beds since the 2014/15 academic year with an average annual growth rate of 5.9%.

Direct let beds account for 80% of all new PBSA supply over this period, while beds with a lease or nomination agreement with a university account for a further 14%. The core components of PBSA demand are first year, international and increasing postgraduate students. Analysis by JLL shows that 41% of PBSA tenants are international students. On this basis, there is still a shortfall of over 370,000 beds.

Therefore even in case of a harsh Brexit or covid-19, there would still be a stable demand from UK students and other internationals that want to go back to school instead of studying online due to limitations in learning. Recent pandemic especially affects all industries and businesses but eventually, people will get used to the new way of living with precautionary measures in place.

In addition, 23 september 2020, Savillas released another market outlook [2] on PSBA quoting “The UK remains as one of the top choices for international students nevertheless. Investment into UK purpose-built student accommodation (PBSA) has grown dramatically in the last two years.

Though the coronavirus pandemic will restrict investment activity in the coming months, with record activity in H1, we predict 2020 will still be a strong year for PBSA investment. 2020 will represent a new high in terms of PBSA investment activity. In May, Blackstone acquired iQ Student Accommodation in a £4.66 billion deal. This transaction alone is worth more than all the PBSA stock traded in 2016, 2017 or 2018.

Followed by recent The Edgeprop published a news [3] on 24 September 2020, Singapore based Q Investment Partners (QIP) launched GBP 30 mil student accommodation fund. Young, founder of QIP, mentioned “We quickly accepted the need to re-imagine what the new norm will be in the UK university sector and respond accordingly to build long-term student housing products that will be resilient”.

Also, in the recent years, student housing standard of living has improved drastically in which it provides security, full facilities such as gym and mostly come in fully furnished units. Furthermore, some student housing also allows new graduates or young working adults to rent a unit in the development, providing a good mix of community.

Now, we can agree that PBSA is a good asset class to invest in the UK based on various reports. In summary, what SA is trying to provide to all investors is a very revolutionary way to allow everyone to become a property co-owner, owning a fraction of the real estate under a licensed, proven infrastructure in blockchain technology to tokenize the asset. Our approach as compared to the big investment players in the market entering into the UK is that our investment structure is 100% equity without finance from the bank. We know at times, to maximum gains, often leveraging such as loans or financing is essential. However, we want to take an even more defensive approach in order to protect our investor’s best interest during times like Covid-19. As once we take on loans from the bank, should any unforeseen circumstances occur, the bank will take the initiative and enforce rights. Therefore, we would not want to take any chances for our investors and allow our investors to invest in different projects on our platform in an affordable way. Since our project is on a single property unit, selling it off market would be easier.

[1] JLL released a report in 2019
[2] Savillas released another market outlook
[3] The Edgeprop published a news

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