Danish student housing investment opportunities highlighted
Published 08/10/2018
Denmark is the latest European country with a student accommodation crisis to be highlighted by the Class of 2020 think tank, and it’s advice to potential investors is to follow the old adage and invest in crisis.
According to a paper looking at the Danish student housing market in 2018, the housing issues in the small northern European nation arise from the constant demand on the higher education system, from both domestic and international students.
“In the immature student accommodation market, opportunities can be found everywhere”
Though the student population of Denmark increased rapidly between 2008-2014, the housing stock (neither public or private) kept pace. Denmark suffered from its popularity, and much like the Netherlands, Sweden, Turkey and others, it is now battling a crisis – with student housing only able to accommodate 28% of students nationwide.
While some institutions, such as the Technical University of Denmark in the capital Copenhagen, are building new on-campus blocks in an attempt to alleviate the growing concerns, even those HEIs do not think such institutional investment will be enough.
According to DTU’s Mikael Hyttel Thomsen, director of Housing Fund DTU, it is a “small step in the right direction”.
“The lack of affordable housing is a major challenge for both Danish and international students. Boligfonden DTU work is to remedy a subset of the housing problem for international students and guests who do not have a network in Denmark,” he recently told The PIE News.
The city has the worst student housing sector of any featured by the latest report, with 12,382 ‘study rooms’ available for the 72,098 students in the Danish capital each academic year.
Class of 2020, the European student housing think tank based in Amsterdam, has now advised investors in the sector to look to Denmark, following the lead of global investment and real estate experts CBRE, telling readers of its briefing email that the country is both “the right time & place to invest.”
“The Scandinavian housing market has generally stricter regulations than other markets in Europe. In the end it has to be a mix of public and private investments to quickly overcome this supply gap, and we do see private parties moving into the Danish market albeit slowly,” a spokesperson told The PIE News.
However, despite the apparent abundance of opportunity for student housing investors and developers in Denmark, the political will to continue the levels of growth in the international student population is weakening.
At the beginning of 2018, Danish tax minister Karsten Lauritzen expressed dismay at the trend for mobile students from other EU member states, often on Erasmus+ study periods, to leave study loan debts unpaid after returning to their home country.
“It has to be a mix of public and private investments to quickly overcome this supply gap”
Although the idea of EU assistance to reclaim the debt was laughed out by the European Commission, the efforts have not stalled.
Since then, however, a further potential hit to the number of international students – and therefore the international student housing market – was seen in August, as Minister of Higher Education and Science, Tommy Ahlers, said the current system meant Denmark was expected to “solve the educational responsibilities of other countries,” and announced a cut to English medium of instruction places at Danish universities.
But according to CBRE, none of this has affected the potential for investment in the Nordic economy. Student housing remains the third most valuable sector of investment, with stability often the key word. Many pension funds already invest in the sector, citing stable returns on their investments. The cyclical nature of the sector could be a danger, but according to the global firm, the current shortage negates this factor.
The Class of 2020 explained the popularity as down to “the continuous increase of student mobility globally… [created] an opportunity for sovereign wealth funds and pension funds.”
The consultants also point to Brexit as a boon for Denmark, although how far cuts to EMI courses extend could put paid to such a boost.
But the question of investment opportunities in the country is not a single-issue one, and nor is it single-location.
Although the majority of students are based in Copenhagen, and consequently, the biggest gaps in student housing can also be found in the city, the opportunities are wider than just the biggest city, according to The Class.
“In the immature professional student accommodation market, opportunities can be found everywhere, pending on a wide range of indicators. Copenhagen obviously is a very attractive city to live in and that boosts demand. But there are various Tier-2 cities that offer great opportunities when they combine a well-positioned international university with reasonable development costs,” The Class spokesperson explained.
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