It’s a numbers game. In recent years, one of the most successful submarkets in the UK has been student housing, which even weathered the global financial crisis pretty well.

While in part that is down to the historical lack of supply of high-quality, purpose-built accommodation, it can also be attributed to the global success of the UK education system and the number of people coming here to study.

But that was before the Brexit vote, one of the key messages of which was arguably that many Britons believe current levels of immigration are too high. Now, many in the higher education sector - which prides itself on its internationalism - are deeply worried about the future.

But are their concerns warranted? And what might the impact be on the student housing market?

So far, the overall numbers are holding up. The clearing process for the 2016-17 intake is ongoing, but the latest figures from UCAS show that 495,610 people have been placed in full-time UK higher education so far this year - an increase of 1% on the same point in 2015 - although the proportion of those students who are from continental Europe and elsewhere in the world is as yet unknown.

European influx

What we do know is that EU students (excluding Brits) currently account for around 5.5% of all higher education students and 6.4% of full-time students. The headline figures mask some huge regional variations, though. In London, for instance, students from other EU states account for around 17% of the total.

And in Scotland, where EU residents (excluding the English, Welsh and Northern Irish) are entitled to free tuition, the proportion rises to 20% - or as high as 25% in prestigious university towns such as Edinburgh and St Andrews.

In the short term, the expectation is that the Brexit vote could actually boost both EU and domestic student numbers. Richard Gabelich, chief executive of Campus Living Villages UK, says this is partly due to young people taking advantage of visa-free access before the potential border shutdown, but adds that it also has to do with the hit to the pound following the vote.

“International students could be encouraged to enrol to take advantage of the lower value of the pound if it doesn’t fully recover to pre-referendum levels,” he says. “And if the cost to study abroad remains inflated for UK residents, we may also see a short-term spike in domestic applicants who may otherwise have considered international study.”

Immigration trepidation

Whether the volume of EU students can be maintained in a post-Brexit world is questionable, however. Firstly, there is the matter of immigration - the issue at the heart of the ‘leave’ campaign.

Almost immediately after instatement in July, the new prime minister Theresa May distanced herself from her predecessor’s stated ambition to limit net immigration to the “tens of thousands”, but she does have form when it comes to foreign students. As home secretary, she tried - unsuccessfully - to include foreign student numbers within the overall immigration target.

“I understand that as a result of pressure from the universities and some in government, that was avoided,” says James Kingdom, principal researcher at Bilfinger GVA. “But we don’t know yet what the government’s plans are with immigration targets.”

Most, however, don’t think the sector has anything to worry about. “There is a great deal of uncertainty, but nobody is saying it’s a good idea to restrict overseas students through visas,” says James Pullan, partner and department head at Knight Frank.

“And no political party is suggesting that reducing the number of overseas students is a positive objective. I think we should be confident that the situation is unlikely to change.”

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Even if EU students were required to go through the full visa application process and had to pay full overseas student tuition fees, there is reason to believe they would keep coming.

“If you look at the global figures, the majority of overseas students are in the US,” says Kingdom. “There are something like 840,000 overseas students in the US. We have some of the highest tuition fees in the EU, but it’s stillcheaper than the US.”

Indeed, universities themselves might even find themselves financially better off if EU students had to pay the full whack for their tuition.

“The UK is still well positioned in terms of top universities, and that means that demand will still be there and people will come,” adds Kingdom. “There could be a benefit for the universities themselves as they’ll be able to charge higher fees.”

Certainly, the market seems to expect that overseas students will continue to favour the UK. The consensus is that so far, investment in operational assets has been largely unaffected.

“The market is performing well and fundamentally it’s because there is strong occupational demand,” says Pullan. “The investment market for operational schemes remains strong.”

JLL, which claims to represent 60% to 70% of transactions in the market, is similarly bullish. The firm is currently working on several deals, including a single building transaction in London trading at £140m and a student housing portfolio going through at around £500m.

“We’ve got some big transactions going through at the moment, and none of them have been directly affected by Brexit at this stage,” says JLL chairman of alternatives Philip Hillman. “Nobody has wanted to come back and chip the price.”

No deep impact

It’s not that the referendum hasn’t had an impact - several agents say investors are taking stock of the situation and pursuing deals with greater care. It’s just that nobody can point to a concrete example of a deal falling out of bed or a price being seriously affected as a result of the vote.

Given that a comprehensive study conducted by JLL found that 20% of commercial deals were immediately and directly affected by the ‘leave’ result, that is quite something.

“I think due diligence is taking longer, and people are a bit more focused on due diligence,” says Hillman. “If something isn’t quite right, they want to know why, when pre-Brexit vote they would have just gone with the heat of the market. I’m sure some will say there has been a direct impact, but I can’t pinpoint anything in terms of yields, and our valuers haven’t made any specific adjustments.”

Pullan reports a similar, if slightly less bullish, attitude in the development market. “I think there is more scrutiny of development opportunity,” he says.

“There is more caution, polluted by the wider market rather than the student accommodation market itself. Certainly, forward funds and forward commitments are more difficult than they were before. But it’s a natural evolution in a higher-risk environment.”

At Campus Living Villages, Gabelich doesn’t foresee any immediate bumps in the road. “We still have a significant pipeline, and we don’t see either equity or debt appetite for good-quality transactions changing,” he says. “The market is widely considered to be in a state of structural under-supply and a relatively low-risk and recession-resistant asset class.”

A sting in the tail?

So to date, the implications of the referendum for student housing have been pretty benign. However, there are still concerns about how the long game may play out.

No matter what specific policies and arrangements are ultimately put in place, some believe that the very fact of the ‘leave’ vote will cause lasting damage. The problem is one of perception.

“One of the key things that I’ve heard from the universities is that they’re worried about the impression it gives to overseas students that they wouldn’t be welcome here,” says Hillman. “I think that perception is more important than the technical stuff.”

The perception issue also applies in terms of university research programmes. Currently, around 15% of research funding in UK universities comes from the EU. After the referendum, umbrella body Universities UK expressed concern that UK institutions would no longer be able to access such funds.

The new government subsequently sought to reassure them, announcing in the middle of August that it would honour payments through to 2020.

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The announcement was welcomed by Universities UK, but again some believe that the damage has already been done. In the spirit of international collaboration, universities often apply for funding in partnership with their European counterparts - and there is evidence that universities in the EU are already wary of entering into such arrangements.

“[The government’s announcement] is a bit of a safety net, but it doesn’t address the longer-term impact,” says Hillman’s colleague, alternatives associate director Robert Kingham, whose clients are exclusively universities.

“There have been quite a few anecdotal stories about research teams suddenly getting rather frosty receptions in situations where you’ve got a UK research team trying to go after EU funding as part of a wider EU research team. The Europeans are asking if it’s a risk to have a UK institution on board.”

Gabelich adds: “There have already been reports of funding withdrawals and renegotiation of research partnerships with EU institutions, creating an uncertainty among academics and potential longer-term reputational impacts if not addressed.”

Knock-on effect

A lower level of research funding won’t have an immediate impact on student numbers and therefore student housing demand, but it could in the longer term. The quality of a university’s research is key to its standing internationally. “They do rely on their research reputation,” says Kingham. “It all feeds into the global ranking.”

For now and probably several years to come, the Brexit vote is unlikely to put much of a dent in the student housing market. The undersupply of high-quality, purpose-built accommodation, the weakness of the pound and the strength of the UK’s educational offer will see to that.

But in the longer term, the government and universities themselves will have to work hard to ensure our institutions don’t slip down the international league tables.

They will also be hoping the xenophobia whipped up by the referendum was just temporary and that the world’s brightest and best don’t start switching their attentions to other countries. If they do, there is a very real risk student numbers will start to dwindle - and with them the student housing market.