INVESTMENT OPPORTUNITIES IN DUTCH STUDENT HOUSING
With a booming student population and a significant demand for accommodation, the Netherlands’ student housing market has transitioned into a stand-alone asset class.
The Netherlands is home to one of the world’s oldest and most highly respected higher education systems. The country is so popular as a study destination that QS World University Rankings 2014/15 placed 13 universities in the country within the world’s top 400. In addition, the Annual Study in Europe Interest Monitor found that the country is the third most popular study destination in Europe for international students.
As a result of the influx of students, there is a quantitative demand for new housing and with it vast investment opportunities.
DEMAND FOR HOUSING
According to the property consultant Savills, the latest national forecast reveals that the number of students is estimated to increase by around 45,000 in the period till 2025. According to Savills’ report on the student housing market in the Netherlands, in order to address the challenge 17,000 new beds within purpose built students accommodation are planned to be realised in the coming years, reducing the undersupply of student housing.
The consultant estimates the shortage to be around 50,000 – 55, 000 units. However, the shortage remains is an extensive qualitative mismatch between the demand for rooms with private facilities, and supply of rooms with communal facilities.
While Amsterdam is the market where student numbers are highest and above 100,000, there are three other cities with over 50,000 students, these include Utrecht, Rotterdam and Groningen and six more with over 20,000 students, and within these cities – according to Savills – there is a substantial undersupply of student housing.
The large and increasing share of English taught programmes combined with low tuition fees play an important role when attracting international students.
“Within the research universities the share of international students is currently 12.2% (up from 8.6% in 2008) and within universities of applied sciences the share stands at 6.9% (up from 6.2% in 2008). The ongoing internationalisation makes it highly likely that the number of foreign students will remain growing in the coming years, thus increasing the demand for student housing for international students,” says the Savills report.
IMPACT OF GOVT LEGISLATION
In the midst of a booming student population and demand for housing, new government legislation is likely to impact the future growth of students. Last year the Dutch government introduced a controversial bill that would convert student grants into loans. According to Bas Wilberts, Associate Director of Investment, Savills Netherlands, the new law will increase the costs of studying and is likely to have a negative impact – in the short term – on the total number of students and their housing preferences.
However, new legislation and an increased number of student housing projects could tackle the shortage problem.
The law which comes into effect in September later this year will mean that students will need to repay their study loans once they earn more than the minimum wage. The loan, which will have a fixed interest rate, would be repaid over 35 years.
“The legislation will affect all new bachelor and master students. Although, we have to wait as to what the exact impact will be on the future student population. Previous changes in the system, in other countries, sometimes had substantial effects, but the effects faded out in time, as studying is an excellent personal investment,” says Wilberts.
Commercial investor interest for student housing in the Netherlands increased further over the past few years and multiple Dutch and international investors are actively looking for opportunities.
Last year, in particular, saw significant local and foreign investments in the Dutch student housing market.
“Among it, the EUR 150m agreement in the summer of 2014 between German based International Campus (IC) and Dutch student housing association DUWO aiming for at least five new housing schemes, as well as another EUR 150m agreement between Perella Weinberg Real Estate and The Student Hotel,” says Wilberts.
The Student Hotel will use the capital to expand its network in the Netherlands and other European countries. This includes a 574 room redevelopment of the Parool and Trouw towers in Amsterdam, a planned development in Maastricht-Belvédère in the Eiffel building and a 365 room project in Groningen-Ebbingekwartier.
“We have also seen Hanson Asset Management investing EUR 55m in a residential project in The Hague, which will include 586 rooms for students. National investors are also increasing their focus towards the student housing market, for instance the investments of Bouwfonds (new projects in Amsterdam and The Hague, as well as the EUR 110 million second closing of their European Student Housing Fund),” says Wilberts.
Another noteworthy development coming up is the Spinozacampus development, which includes 552 units next to the existing 700 units.
Investor interest is increasing substantially and a strong case can be made that the Dutch student housing has reached maturity, according to Savills.
Although interest from national and international investors for the Dutch student housing market remains very high and is reflected in yields dropping to 5.5% from 5.75% last year. In addition, specific social student housing corporations, like DUWO and SSHN, are investing in many of the student cities.
“Our advice to investors would be to get good local advice. Each city has its own demand and supply characteristics and with a substantial number of new projects on the way, the right choices have to be made,” says Wilberts.
According to Jeroen Jansen, Associate Director of Research, Savills Netherlands, investors are increasingly refurbishing vacant office buildings into student accommodation.
“Refurbishing vacant office buildings into student housing remains an important trend, as it tackles two problems at the same time and municipalities are often willing to help out with a change of the zoning scheme,” says Jansen.
However, greenfield developments are taking place, like the development of 1,900 student houses in Leiden by Syntrus Achmea, while a number of schemes concern temporary student housing, like the Ravel Residence by Haerzathe.
“In the first months of 2015 a number of noteworthy transactions took place. Bouwfonds IM purchased ‘De Admiraliteit’ in Rotterdam and will transform the former office building into residential (319 units) and student housing (268 units), the latter as part of the European Student Housing Fund,” says Jansen.
“In addition, developer Certitudo recently purchased a 2,900 sqm office building in Arnhem- Presikhaaf and it will start with redevelopments in Rotterdam and Dordrecht. As there are many more foreign investors open for acquiring student housing assets, it is more than likely that 2015 will see an even higher inflow of capital than 2014,” adds Jansen.
For Jansen, an important fact for investors is to consider how they deal with the operational management of the student housing objects.
“Should you do it yourself? This implies setting up a management organisation. Should you outsource it to other operators? Then you lose some of the flexibility, some of the profit and potentially some of the quality of service. The second concern is the potential effects of the new legislation. While we do expect that on the longer term the effects will be more limited, as students get used to the legislation and higher education remain essential, the regulation will have a temporary effect,” he says.
Savills predicts that for the duration of 2015, all eyes will be fixed on the new legislation and its effects.
However, in the meantime the student housing market continues to be undersupplied and previous estimates foresee an increasing number of students leaving potential for a substantial number of new developments.
“The increasing interest and activity of (specialised) institutional investors finally turns the market for student housing into a stand-alone asset class,” says the report.