ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Nikkei Markets

Singapore companies turn to student housing for returns

Crowded market and lower rental yields emerge as risks

Singapore Press Holdings earns more money from property than publishing (Photo by Keiichiro Asahara)

SINGAPORE (Nikkei Markets) -- More Singapore companies are investing in student accommodation, drawn by the property subsector's relative independence from the factors that drive returns in other types of real-estate such as malls and offices.

However, as the popularity of the segment grows, finding assets that will generate good returns is becoming a challenge, property consultants and investors warn.

Singapore companies that have recently invested in student housing include Singapore Press Holdings, which bought 14 purpose-built student accommodation buildings in the U.K. for 180.5 million British pounds ($238 million) in September. Last week, Far East Orchard, which is part of the Singapore-based Far East Organization, bought three U.K. properties for 55 million pounds.

Besides adding diversity, student-housing investments help even out portfolio returns as changes in rent and valuations in the segment are unrelated to fluctuations in other assets such as malls and offices.

SPH, which earns more money from property than publishing, plans to grow student housing into a "sizeable platform" to earn recurring income, CEO Ng Yat Chung has said.

Student accommodation in countries like the U.S., U.K. and Australia has become popular among Asian investors in recent years due to growing foreign enrolment in universities and the prospect of earning higher yields relative to other property investments. In the U.K. for example, the number of students from outside the U.K. and European Union has tripled since 2000, according to Cushman & Wakefield, a property services firm.

The South China Morning Post, citing London-based Real Capital Analytics, said earlier this week that Singapore was the top foreign investor in U.S. student housing between 2016 and 2018, putting in a total of $5 billion in the three years.

Most market players believe student accommodation continues to be an attractive segment, although they note that valuations have risen, lowering yields. For example, such properties in the U.K. now transact at rental yields of 5-6% compared to 6-7% five years ago.

Explaining Far East Orchard's interest in student housing, group chief executive officer Lui Chong Chee said in an emailed reply that the U.K. purpose-built student accommodation sector has a track record of strong occupancy and rental growth that is not correlated to the overall economy.

U.K. universities typically partner with student accommodation operators by securing apartments for new students as well as providing referrals, giving investors a more predictable revenue stream and occupancy rates, he added.

With last week's acquisition in Bristol and Liverpool, Far East Orchard's student housing portfolio has grown to around 2,100 beds across eight properties in the U.K.

Other prominent Singapore investors in student accommodation include sovereign wealth fund GIC and Mapletree Investments, a unit of state investor Temasek Holdings.

However, while student housing continues to offer returns that are higher than those from offices, malls and standard apartments, the risks have also increased. Already, portfolios of existing student accommodation are being offered at a premium to standalone properties, reflecting the strong demand from large institutions that want to scale up quickly.

Kevin Gin, a director of Alpha Capital, a fund manager, said that investors entering the sector for the first time are probably late in the game, and that the risk of government intervention needs to be considered.

"You can't price gouge students unlike with occupants of luxury apartments...The Western world is becoming more socialist so regulatory issues are likely to arise," he said.

Kong Chee Min, CEO of Singapore-based Centurion Corp, which has a range of property assets, including housing for workers, added that investors need to understand individual markets as conditions can vary. For instance, while the U.S. and U.K. are mature markets with existing student accommodation that can be acquired, a new entrant to Australia will probably have to develop and manage its own properties.

Centurion entered the student accommodation market five years ago and currently owns or manages properties in the U.S., U.K., Australia, Singapore and South Korea.

Priyaranjan Kumar, regional director of Cushman & Wakefield's Asia Pacific capital markets group, said that going forward, investors will have to pay more attention to the design and management of properties for students to extract higher returns.

"Like with hotels, you want to be with a strong operator because you need to fill the rooms," he said.

--Kevin Lim

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more