Student sector crisis: visa restrictions push operators to rethink investments

When regulations change, the real estate market responds

The student housing sector in the United Kingdom is undergoing a significant transformation. Recent changes in immigration policies have forced major operators to reconsider their expansion plans, leading to drastic decisions such as withdrawing from already approved projects and revising long-term strategies.

The Paddington project: from ambitious plans to cancellation

One of the most evident cases of this change is United’s decision to abandon its £147 million development in Paddington, central London. Although the project had received planning approval the previous year and promised to provide 605 modern student rooms, the company assessed that market conditions no longer justified the investment. A narrower profitability analysis revealed that the project was no longer economically viable under the company’s new financial sustainability parameters.

The impact of visa policies on student flows

The roots of this decision date back to the UK government’s political choices aimed at reducing overall immigration numbers. Measures introduced include a tax on university revenues derived from international graduates’ tuition fees, stricter restrictions on the stay of foreign students, and limitations on post-graduation employment in the UK.

Joe Lister, CEO of United, highlighted how these measures are altering university behavior. Academic institutions are now shifting towards enrolling British students, with significant consequences for housing market planning. “Universities face increasing financial pressures and are less willing to take on additional risks in their housing commitments,” Lister explained. “Their priority is to avoid ending up with unoccupied facilities that would incur significant management costs.”

Signs of weakness in the market: occupancy data

Economic indicators reflect this transformation. United announced occupancy rates of 64% for the upcoming academic year, down from 67% in the same period last year. This demand contraction is not isolated: Empiric Student Property, which United is acquiring in a £634 million deal, reported in November a marked decline in demand from Chinese students. Empiric’s leadership attributed this drop partly to ongoing geopolitical tensions in the international landscape.

Delays in other projects and portfolio review

Caution is not limited to the London project. United has also postponed the completion of a 500-room development in Bristol, citing the need to evaluate alternative strategies to maximize investment returns. At the same time, the value of United’s main real estate fund dedicated to student housing has contracted by 0.7%, reaching £2.8 billion.

The company’s response has been strategic: the funds saved from reduced construction activity have been redirected toward a share buyback program worth £100 million, a move that reflects a greater priority on returning value to shareholders rather than expanding the portfolio.

The macroeconomic context: declining net migration

Data from the Home Office provides the overall picture of this change. Net migration to the UK is expected to reach the lowest levels in the past twenty years. In 2024, the number of foreign workers entering the country was over 100,000 lower than the previous year. While applications for students and seasonal workers have remained relatively stable, there has been a contraction in the number of incoming dependents.

This convergence of factors—from regulatory choices to market dynamics and geopolitical pressures—is reshaping the landscape of the student housing sector in the UK, with implications likely to extend beyond the short term.