The National Student Housing Monitor shows that when choosing accommodation, students primarily consider cost, type of dwelling and location. One-room apartments are particularly popular, provided they are affordable and well located. However, the tight housing market often forces students to make compromises, which influences their willingness to pay more. On average, students are willing to pay €197 more per month for a self-contained one-room apartment (studio) compared with a room with shared facilities. This indicates a clear preference for comfort and convenience, as long as affordability remains within reach.

The growing demand for studios offers attractive opportunities, particularly in locations with good amenities. Moreover, these dwellings are not only popular with students but also with young professionals. This broad target group increases flexibility of use and enhances alternative use potential in the event of a sale or repurposing. The figure (see right) illustrates the difference between willingness to pay and current housing costs. It shows that larger studios in particular are highly preferred. By contrast, the absence of housing allowance in the non-self-contained segment reduces affordability and therefore willingness to pay.

In recent years, student housing has proven to be a stable and attractive investment category. During the pandemic, when other real estate segments were under pressure, demand for student housing remained strong. Vacancy even fell to 0.6%, below the long-term average of 0.8% over the past ten years. This was driven by continued growth in student numbers, even during periods of economic uncertainty, demonstrating the resilience of the sector.

Investments in student housing, particularly self-contained units, generate stable cash flows. Regulated dwellings offer relatively high rental income per square metre, which is stable and predictable due to their inclusion in the housing valuation system (WWS). Given strong demand, letting risk is very low, enabling attractive income returns.

Current risk premium offers opportunities

Historically, relatively little investment was made in student housing, mainly due to the specific risks associated with this asset class. These risks were often unfamiliar or difficult to assess, particularly for Dutch institutional investors. First, the concept of student housing was less established in the Netherlands than in countries such as the United States and the United Kingdom, where purpose-built student accommodation with associated facilities and services has been common for longer. As a result, many Dutch investors were less familiar with managing student housing and the specific needs of students.

In addition, political risks—such as uncertainty surrounding housing allowance and changes to the housing valuation system—represented a significant barrier. For Dutch investors, it was difficult to assess the impact of potential regulatory changes, making them reluctant to enter the market.

Today, however, these risks are better understood and more manageable. Experience with student housing has increased, and foreign investors have helped further develop the sector in the Netherlands. Investors have learned how to deal with the specific requirements of student housing, from providing appropriate amenities to managing political and regulatory risks. Moreover, demand for high-quality student housing has increased, partly due to the growth in international students and a greater focus on sustainable and flexible living solutions. As a result, risks have become more manageable, allowing investors to enter the market with greater confidence.

Attractive risk premium

The risk premium for student housing relative to prime residential real estate is substantial, with a spread of approximately 150 basis points. Initial yields are on average 90 basis points higher than in the regulated rental sector as a whole. Historically, student housing investments have delivered returns comparable to those of residential real estate, but with lower volatility. The declining risk profile, lower return volatility and comparable returns relative to residential property make the current pricing of student housing attractive.