Liverpool student housing market in rude health, but needs purpose-built schemes

The student accommodation market in Liverpool is outperforming most of its peer cities, a new report by Liverpool-based property agent City Residential claims.
It says the city, in this regard, has performed strongly over the past 10 years.
A combination of low rents – compared with other UK cities – affordable living costs and a lively social scene has cemented the city as one of the most popular places to study.
Over the past few years the market has had challenges such Covid, a change in the VISA system and changing students’ needs/requirements to deal with.
This appeared to be starting to impact the market last spring as lower international student numbers and doubts over UK student numbers – more favouring apprenticeship learning – affected the take up numbers.
Thankfully by September 2024, there was a sense of relief amongst the universities, landlords and agents as student numbers across the board recovered strongly.
University of Liverpool
The report said, speaking to the universities, landlords and PBSA (purpose built student accommodation) operators, the market seems to be in a good place. Everyone appears to agree that Liverpool is outperforming nearly all of its competing cities where some of the structural challenges in the student market are beginning to have an effect on student numbers.
It said: “As we’ve said before, the attractiveness of the city as a place to study together with the flexibility and innovation shown by the city’s universities should ensure continuation of this outperformance.”
It says as the market has performed in line with expectations, and ahead of the national average, both the universities and student landlords have been able to raise rents at/or ahead of expectations.
As Liverpool is seen as an affordable city to study, the lower end of the market continues to perform extremely well with a general consensus that if there was more stock in this market segment then it would let extremely well.
That is not to say that the middle/upper end of the market is not performing well, it most certainly is. It is interesting to note that in terms of student requirements there is a strong demand across the board with interest levels in cluster (both ensuite and non ensuite, studios and student housing) all performing well.
In previous years concerns over certain student types of housing (such as studios a few years ago) soon dissipated as demand recovered, whether this due to a change of demographics, lack of new PBSA or affordability in comparison to other cities.
Focusing on overseas students, the report says the decision by the last government to restrict students bringing family members with them from January 1, 2024, on all but postgraduate research courses and courses with government-funded scholarships, has had quite an impact on the market.
When this was announced in May 2023, the belief was that this would result in around 140,000 fewer people entering the UK and also deal with the ‘back door’ route to work in the UK.
This ban also coincided with a dramatically reducing demand for student study in the UK from Chinese students.
There are various reasons for this, such as an encouragement for Chinese students to study in China, safety/integration concerns and competition from other countries.
The latest Universities UK data reveals a 37% decrease in undergraduate applications from China for the 2024 entry cycle compared with the previous year, dropping from 31,400 to 19,680 applications.
Liverpool John Moores University
The impact on both the UK and Liverpool student market has been substantial and the local market is not immune from this shift in demand.
As all UK universities are heavily reliant on the substantially higher fees paid by overseas students, this loss of income is creating challenges, although the Liverpool universities appear to be dealing with these issues well.
While some of this demand is being replaced by students from the likes of India, Pakistan, Middle East etc, these students very often have different accommodation demands from Chinese students.
For example, Indian students are predominately focused on renting at the more affordable end of the market, whereby the Chinese students were the opposite.
The report also finds that there has been very little PBSA stock built in Liverpool over the past few years and the current pipeline continues to hover around all time lows.
The main reason for this lack of new build is viability. With construction costs having increased sharply over recent years and Liverpool’s student rents still some of the cheapest in the UK, there are very few land opportunities that make commercial sense.
While these are the same challenges faced in many UK cities, Liverpool is probably one of the most difficult cities to get a new PBSA scheme funded and built.
That is not to say that there is no demand for investment in existing PBSA opportunities or for completing schemes that are stalled or can be reworked into student accommodation.
Blacklight Capital Partners has been particularly active in the market and in Tom Mees’ (Development Director) own words “we couldn’t be more positive about the city”.
Having acquired the 999-bed Aura scheme in Islington it followed this up with the purchase and completion of the 535-bed Limelight scheme on Norton Street which has recently been voted the no.1 PBSA property in the city.
The company has also just announced the purchase of the stalled YPG 164-flat Devon Street development in Liverpool.
Tom also notes some other reasons for investing heavily in the city such as “both LJMU and University of Liverpool climbed the rankings last year to further underpin their popularity amongst students” and “rents in Liverpool are affordable relative to many other UK cities, which just adds to Liverpool’s ever-increasing popularity amongst students and their parents”.
Some existing PBSA owners and operators are looking to improve/repurpose existing student stock, especially in some of those buildings that are due a refurbishment or struggling to compete with some of the more modern PBSA that has been built over the past five-10 years.
While this would seem to make sense, the universities are keen not to lose some of the more affordable stock which will naturally happen if the PBSA owner increases rents off the back of this investment/Capex.
Turning to what impact the Renters Rights Bill will have on the student market when it comes into effect around early summer, City Residential says it is probably the most fundamental change in the Private Rented Sector for more than 20 years, adding, the effect of this Bill on the student sector could be substantial, although it will probably only affect the more traditional style of student (HMO) style housing than it will PBSA and university accommodation.
Probably the most substantial impact on the sector will come from the proposed abolition of fixed term tenancies which are, in effect, essential for the sector ensuring that both students and landlords have security of a 12 month tenancy.
If the Bill, as proposed, is enacted it will, in effect, allow student tenants to leave their tenancies during this 12 month period, thereby massively affecting the security and income for the student landlords.
While the new Bill may allow tenants to leave midway through that 12 month period, the report questions whether this would actually happen in practice.
It argues that the likelihood of a group of student tenants in a house – sometimes as many as seven or eight students – agreeing between themselves to leave is highly unlikely, unless there are some major issues with the house/landlord.
Also, where would they go to? How many other student houses will be available to them to move into?
The other potential issue has come about from Labour’s decision to add a late amendment to the Bill which proposes a ban from any tenant being asked for, or accepting, any more than one month’s rent up front.
As many students use their maintenance loan, paid in three instalments, to pay the rent, the consequences of agents not being able to accept a three/four month rent payment from a tenant could be really problematical.
While some tenants may be financially savvy and good with money, there are plenty who may well spend some of this rent money with potentially difficult consequences for the rest of the tenants in their student property.
Many commentators are suggesting that the potential effect of the proposed Bill on the student sector may well be a hurried exit by student landlords.
Just like the PRS market, there is no doubt there may well be some smaller landlords who decide the changes will hugely increase the risks associated with letting to students.
The consensus in the market appears to be that many of the larger student landlords will be keen to exploit a lack of confidence by the smaller landlords and will see this as an opportunity to add to their portfolios.
On a positive note, demand for student housing appears to be really strong with most agents across the city having outperformed in comparison with 2024.
The report concludes that this shows the continued attractiveness of Liverpool as a place to study.