Landlords beware: student market begins to shrink

Falling degree applications in the wake of tuition-fee rises could have a significant impact on the rental market in university towns, warns Lorna Bourke.

Applications down

Landlords who are heavily dependent on the student market for tenants would do well to keep a close eye on university admissions in their area – particularly if it is also an area of high unemployment. Early figures from UCAS, the university admissions service, indicate that to date total student applications for the 2012-2013 academic year are down 9% on last year, and 11.9% for applicants from the UK.

Although demographic changes play a part in the number of student applications, with tuition fees due to rise to a hefty £9,000 a year at most universities it's hardly surprising that applications are down. Long term, the situation could certainly start to affect tenant demand in some student towns.

David Willetts, the universities and science minister, is playing down the adverse effect that high tuition fees will have on student numbers. ‘It is too early in the applications cycle for data to reveal underlying trends – the main UCAS deadline is not until January,’ he said. 

‘Only applications for Oxbridge, medicine, veterinary science and dentistry have closed, with numbers broadly holding up on last year,’ Willets said. This is hardly surprising, as medicine, veterinary science and dentistry are all vocational subjects where students are likely to be able to find employment as soon as they are qualified, which is not the case with humanities subjects. 

UCAS figures show that the number of applicants for courses with a 15 October deadline (Oxbridge and the vocational subjects listed above) has fallen by a meagre 0.8%. But applications for all courses, including those for courses covered by the 15 January deadline, are down by 9%. UCAS says ‘year-on-year changes for all courses at this early stage in the cycle are often different from the position later in the cycle’. 

Sea change ahead

True, but would you advise your teenage son or daughter to run up tuition fees of £9,000 a year, maintenance costs of at least £7,500 a year, and end up three years down the line with debts of over £40,000 for a degree in geography or theatre studies, which will be virtually useless in securing them a job? Clearly not. Inevitably the number of students will fall – possibly quite dramatically – which is what the government intends.

The UCAS figures indicate that places will not necessarily be filled by overseas students. The number of applications from UK students so far has fallen from 59,413 last year to 52,321 this year, a drop of 11.9%. Applications from students from other EU countries are down too, at 6,520 compared with 7,192 last year – a fall of 9.3%.

If you add to this reduction in the number of students the cut in Local Housing Allowance, which will begin to bite in January of next year, and rising unemployment making it more likely that young people will remain living with their parents, landlords in some university town such as Hull, Coventry (the dormitory town for students at Warwick University, which has one of the largest campuses in the country) Leeds, Liverpool, Durham and Newcastle could find demand falling substantially.

Fees, unemployment and rising living costs

The latest figures for unemployment in Coventry, for example, show that 8.3% of those who are economically active are unemployed compared with 7.8% nationally. In Hull, where youth unemployment is the highest in the country, unemployment is at a 17-year high, with nearly 45 job seekers for every vacancy. 

‘Tuition fees are going up, and that may well affect people's decision whether or not to apply to university, but it doesn't stop there,’ said Matt Hutchinson of Spareroom.com, which reckons it covers 64% of the flatsharer market, where many students look for accommodation. ‘Rents are also increasing, along with food and energy costs, so the final debt the average student graduates with may well be the biggest factor for some.’

Hutchinson points out that in cities that have a mix of student and professional renters landlords may well not feel the effects. ‘But where the student population is a big presence such as Coventry or Durham things could be different.