MADRID/LONDON, Sept 26 (Reuters) – Global investors are piling into Spain’s under-supplied student housing market as the country emerges as a top destination for international students willing to pay premium rents.
Cities from Madrid to Barcelona have seen an influx of overseas buyers and developers, attracted by the prospect of inflation-topping returns and international student numbers that have rocketed 77% in the past decade.
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U.S. developers Greystar and Hines – two of the biggest student landlords in Europe – told Reuters they were actively looking to expand their Spanish portfolios.
Although beyond the means of many locals, new student blocks have not provoked the same backlash as the proliferation of short-term holiday lets, which has sparked protests against overtourism in Spain.
‘THE MOST LANDLORD-FRIENDLY’
“The fundamentals in Spain are arguably the best in Europe,” said Nigel Allsopp, head of investment strategy in Europe for Greystar, which operates more than 5,500 student homes in the country.
“The ratio of beds to students is the most landlord-friendly…For that reason, growth is pretty strong. It’s obviously a very hot sector.”
Spain’s student housing market is relatively immature compared with other parts of Europe, meaning demand far outstrips the supply of purpose-built accommodation.
There are just 117,000 beds in such developments, covering less than a fifth of the 622,000 students in need of accommodation, according to agency JLL. In Britain, about 30% of the student market is covered by purpose-built developments.
The influx of global cash chasing returns poses a social challenge for Spain, as developers prioritise premium flats particularly for overseas students who can pay more than 1,000 euros per month, while some local students struggle to find rooms for half the price.
The student sector has fewer rules than Spain’s increasingly regulated wider market. It operates under service agreements rather than leases, allowing rents to be hiked more easily or when students leave, investors said.
Hines said it was planning to develop 1,700 new beds in Iberia, after 30% revenue growth in one of its first Barcelona projects in 2024.
Prime yields on student flats are 4.5% in Madrid and Barcelona, according to agency CBRE, topping the benchmark 3.3% on offer from 10-year government bonds.
‘TOO DIFFICULT TO FIND A PLACE’
Laura Teske, a 21-year-old second-year student from Germany, has moved into one of the newly built upmarket blocks in Madrid.
Teske said she was paying 1,080 euros ($1,271) a month for a room with a kitchen in a nine-building complex built by local investor Stoneshield Capital, and is looking forward to greater comfort after leaving a cheaper shared flat.
The development offers residents a gym, pool, library, and a roof terrace. Stoneshield said it would double its portfolio of 10,000 student beds in Spain and Portugal over time.
Jose Angel Martinez, a 22-year-old film student from Spain, has a budget half of Teske’s.
“Now it’s too difficult to find a place for less than 500 euros…I think many places have gone to rent to tourists,” Martinez said, adding he had paid 40% less than that for a room in Madrid five years ago.
Record tourism and immigration have widened the housing deficit to 400,000 homes, according to the Bank of Spain, while short-term rentals for tourists have jumped 25% over two years.
LESS RESTRICTIVE MIGRATION POLICIES
Spain’s appeal has been bolstered by cheaper tuition fees and less restrictive migration policies than in the United States and other European countries, investors said. In Britain, tougher immigration rules have squeezed student visa applications – a potential risk for developers anywhere.
According to research by JLL, a third of Spain’s more than 150,000 overseas students now attend private universities, which tend to attract wealthier foreign students. Nine in ten at business schools such as IESE and IE are from abroad.
“Compared to my hometown Los Angeles or New York, and certainly compared to London, Barcelona is quite affordable,” said American student Claire Zeng, who studies at Barcelona’s IESE Business School.
The premium flats do attract some Spanish students.
Irfati Urra is paying 1,200 euros a month in a central Madrid block.
“The only thing is that my American roommates are very noisy,” she said.
($1 = 0.8496 euros)
Reporting by Corina Pons in Madrid and Iain Withers in London; Editing by Tommy Reggiori Wilkes, Kirsten Donovan