Brexit is expected to have little immediate effect on demand for accommodations in the United Kingdom’s private rent sector (PRS) due to the chronic undersupply of housing in the country. Market analysts even foresee rising rents in the short-term if developers delay plans for new residential construction and/or an influx of immigrants arrives in the period before the UK formally withdraws from the European Union (EU).
Industry concern focused most on the broader economic picture following the recent majority endorsement for the UK’s departure from the EU, as dropping currency value triggered other worries about income and financing.
“We welcome Mark Carney’s steadying words and his reassurance that the Bank of England and the Treasury have extensive contingency plans in place to ensure the country’s financial stability,” Richard Lambert, CEO of the UK’s National Landlords Association, said in a June 24 statement. “Any knee-jerk reaction will have a real impact on our members’ mortgages, rents and overall confidence in the market.”
Alternatively, pent-up housing demand across all tenure types and forecasts for economic uncertainty for the next 18 to 24 months has prospective shoppers looking in with interest. “Overseas investors may benefit from a weaker pound, including institutions investing in large-scale build-to-rent and individual investors,” CBRE’s UK and EU research heads submitted in a post-referendum analysis of possible fallout for real estate markets.
Brexit’s impact on the UK’s postsecondary tuition costs could also have some flow-through implications for Canadian universities and student housing providers. A significant hit to the affordability of UK education could potentially divert students elsewhere if/when they are confronted with fees double to triple the rate that holders of EU passports have traditionally enjoyed.
Approximately 25,000 students from other EU countries begin studies in the UK with each new academic year, paying the same tuition as UK citizens — currently about £9,000 (CAD $15,400) per year for undergraduate studies. In contrast, fees for other international undergraduates at Oxford University, for example, range from £22,400 (CAD $38,300) to £29,600 (CAD $50,600).
Analysts foresee growth in student housing demand in European cities that are already known for cultural, academic and business strengths, and suggest that financial centres poised to attract EU business services away from London could be particularly good investment bets.
“Assuming that 50 per cent of EU students who were planning to study in the UK decide to study in another EU country, this creates additional demand of 10,000 to 15,000 beds per annum, which is significant for cities such as Frankfurt which currently have just 1,500 beds in purpose-built student housing,” states an analysis of potential Brexit impacts from LaSalle Investment Management.
Meanwhile, other students are expected to go further afield for an English language experience if international fees are comparable to or lower than UK tuition. In this, Canada is typically more cost-competitive than the United States. However, as an EU member, Ireland remains best positioned to compete on both affordability and proximity to continental Europe.