Immigration and foreign students should not be confused

Monday 24th December 2012

The student property sector in the UK has provided some of the best investment returns in this country in recent years.

The surge in national and international students studying in the UK has led to a sharp rise in demand for student accommodation, providing investors with attractive, often double-digit, annual property returns.

However, the recent introduction of the higher rate of tuition fee at up to £9,000 threatens to distable the market, with early signs that fewer domestic prospective students are applying to go to university.

But with ten UK universities currently listed in the top 100 of the Times Higher Education World Rankings, there is still high demand from international students looking to study in the UK.

With high ranking universities like Oxford, Cambridge, Imperial College, Durham and University College London, universities in the UK have long been popular with many national and international students fuelling demand for UK student property in the process.

The London School of Economics, the University of Edinburgh, Durham University and the University of York also rank highly in the top 100 list.

In total, there are seven UK universities in the top 50, and 31 in the top 200.

Dr Wendy Piatt, director general of the Russell Group of leading universities, said many UK universities “continue to punch above their weight, with 10 in the top 100”.

She commented: “If we are serious about staying on top, the government must concentrate investment where it will have the most impact - in our world-class research-intensive universities.

“The UK cannot afford to be outmanoeuvred by other countries that clearly recognise that investment in their leading universities is the key to growth.”

But rather than support growth among international students in the UK, the Tory-led coalition government is seeking to drastically reduce the number of global students coming to the UK, with inevitable knock-on effects for economic growth and the student housing market.

Tackle immigration by all means but not at the expense of international students

Last week’s release of the Census data has revealed the extent of the immigrant population in London. People classifying themselves as ‘White Britons’ are now a minority in the capital, making up just 45% of the population. Whilst the government needs to address the issue of immigration, they must avoid implementing blanket policies which catch genuine ‘contributors’ to the economy and society in general.

In an attempt to reduce numbers, the government has targeted a reduction in international students. But estimates of the financial loss to higher education runs between £4bn and £8bn, according to the ‘Universities UK’, and this does not take into account everything else that international students bring to the prime central London economy.

In the very heart of London stand three world class universities; Imperial College London, LSE and King’s College London. The UK’s reputation for top quality education, as well as the burgeoning middle classes in emerging economies, has caused an influx of international students. In the City of Westminster (CoW) alone, there are 75-100,000 students, one quarter of all the international students who come to the UK each year. To put this in context, the resident population of CoW is just over 250,000.

Whilst bankers still make up the largest proportion of central London tenant profile at 37%, the number of new tenancy starts by finance professionals is plateauing. Their share of the sector has only increased 3% since 2006. Students have now become a significant driver in the central London rental market.

Research just conducted by LCP indicates that wealthy foreign students now account for 29% of the PLC private rented sector. They represent the second biggest proportion of the market having more than doubled their share in the last six years. At LCP’s pre-Credit Crunch audit in 2006, they represented just 12% of the market. This international student migration brings significant benefits to the UK economy and it is hard not to conclude that they are making an increasingly important contribution as corporate tenants suffer from stringent belt-tightening.

LCP’s recent study reveals that the average foreign student pays rent of £28,878 per annum in CoW. Add to this the tuition fees paid by each overseas student (for example, studying medicine at Imperial College would currently cost £200,000 over six years) and the leisure and retail trade they support, it is clear that a reduction in the number of students will have a significant impact.

The recent divisive government policies do not seem to acknowledge the importance of the ‘student economy’ – who are net spenders unlike other categories of migrants who may become a further burden on an already beleaguered State. The government have already abolished tier 1 post-graduate work visas (which allowed international students to remain in the UK for up to two years after graduation), running counter to the British Council’s objective to “maintain the profile of the Education UK Brand and reinforce the brand messages associated with it”.

By the 2015 election, the government intends to reduce the annual net migration from 240,000 a year to fewer than 100,000. Students, who are now being classed as permanent migrants, will fall into their definition of immigration meaning that a reduction in the student population helps the Government meet its target. With the US, Canada and Australia classing students as “non-immigrant” admissions and the rest of the world hot on the UK’s heels in terms of higher education institutions, changes to policies will undoubtedly drive international students to other countries.

It is no coincidence that recently released figures from the ONS show they are on target to meet this objective, having reduced net migration by 60,000 this year. Government statisticians have attributed the fall to a reduction in the number of overseas students coming to study in Britain, coupled with fed up Brits exiting the UK for jobs abroad, potentially triggering another ‘brain drain’, according to Naomi Heaton, CEO of LCP.

But Heaton says that David Cameron seems to be seeing some economic sense after he recently announced plans to simplify Chinese visa rules. Currently, 82% of affluent Chinese families are planning to send their children to study overseas and 15% of their overseas students already come to the UK. The Chinese make up the largest proportion of LCP’s student tenants sector at 17%.

Heaton comments: “Foreigners are attracted to Prime London Central as a financial centre, a ‘go to’ destination and as a premier league provider of education. Alongside the aspiration for a great British education, there has been a significant appetite to invest in ‘bricks and mortar’. Recent changes to the immigration rules could send these students, and with them significant international wealth and investment, elsewhere. Hopefully David Cameron’s new stance on Chinese visas will trigger a more commercial approach to the rules on immigration so that international students will continue to make London their first choice to the benefit of the UK economy.”


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