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Student Housing Valuation

Student housing valuation: location first

The valuation of a student housing depends on three main elements: location, services offered and rent cost. The student population has been growing steadily since the 1980s, while the supply of housing remains insufficient. Since the public authorities cover only 15% of the asset’s needs, owners use tax incentives to encourage investors to complete the stock.

In the market, supply shortages put upward pressure on value and downward pressure on rates of return. The average occupancy rate of student residences is close to 100%, making this type of asset very secure for investors.

  • 375,000

    Number of student residences for 1,600,000 students

  • 300,000

    Objective to build student housing by 2020

  • 95 %

    Average occupancy rate in student residences

2018 - BNP Paribas Real Estate Valuation France

Our Expert Point of View

Solenne Loizeau

Expert valuer specialised in service residences

What are the characteristics of student service residences?

Student residences are real estate assets that feature various services: reception, security, laundry, cafeteria, relaxation and sports rooms, bicycle garage, photocopiers. In response to the changing needs of the student population, recent trends include the addition of large common spaces for coworking, and feature increasingly digitalised equipment.

Student housing attracts institutional investors, block purchasers, and individuals who buy on the cutting edge. The latter hold 70% of the properties, in a market marked by shortage. The location of student accommodations (academic city, proximity to transport) is a key element to development.

 

What are the market trends?

The tax advantages conferred by the French Censi-Bouvard law on purchasers of furnished apartments favour the development of student housing. However, this market is characterised by a shortage of supply: the number of housing shortages is estimated at around 842,000 in the 15 largest university cities, while 85% of student housing demand is currently unsatisfied. Public authorities aim to reach 680,000 student housing units by 2020. Due to the shortage, the average occupancy rate of residences generally exceeds 95%, which is a guarantee of security for this type of investment.

 

What are investors' expectations of student housing?

Individuals are primarily attracted to this asset type because of the tax benefits they incur: the provisions of the Censi-Bouvard law, VAT recovery and a fully-furnished rental system. Institutional investors are attracted to the security of a 9-year lease with the operator, which offers the guarantee of a permanent rent. In addition, geographical location is a key consideration for investors that prefer residences located in student cities, close to universities and public transport.

 

 

What are the main valuation criteria for student housing?

The valuation of student housing varies depending on whether the property is already built or whether it is in a state of future completion. In both cases, assets are valued using income capitalisation and direct comparison methods. In the event of a built asset, valuers also take operations balance sheets into account.

Location

Student city, close to universities and transportation

Hotel services

Supply of household linen, cleaning, reception

Student Residence Capacity

Usually 100 rooms or more

Consistency of rent

The rent should not be too high compared to the local rental market

Quality of the operator

References, reputation in the market

The geographic location of a student housing is a particularly important valuation criterion. For example, its location in a highly academic city is likely to increase value. The proximity of higher education institutions and good public transport connections are also decisive factors.

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