In the decade before 2018, house prices in student cities grew at a rate higher than the national average.
From 2009 to 2018, the top 50 university cities around the world saw house prices rise on average 65.8 percent, research from Property Consultants Bidwells found. The average national average growth was around 40 percent.
Strong universities located in areas with a limited housing supply cause disproportionate spikes in house prices, the consultants explained.
“The downside of a booming global city is that house prices in many of those hubs are becoming so high, due to inflation and migration for work, that there is risk of curtailing growth or even a decline in the quality of life, especially in smaller markets with very limited supply,” said Patrick McMahon, Senior Partner at Bidwells, as reported by PropertyWire.
According to the research, these cities recorded the highest hike in prices:
|University City||Increase in house prices (percent)|
Pricing out graduates
The effect of rising prices have unique repercussions, depending on location.
In Oxford and Cambridge, house prices grew 67 percent and 73 percent respectively within the time span analysed. As housing supply in these two student cities were “particularly constrained”, the forecast is for the continued rise in prices, pricing out graduates from staying put “despite burgeoning science and technology sectors currently spinning out billions of pounds of artificial intelligence start-ups in the area,” said Bidwells.
“Bidwells has conducted this research to show what might happen to Oxford and Cambridge if we don’t start taking infrastructure and housing provision seriously. They are small cities who find themselves on the global stage off the back of their world class universities,” added McMahon.
I live in Oxford, with a graduate position.
Current salary = £19K (before tax)
Average Oxford house price = £385,372 (2016 figure)
That’s 20 times my salary.
— Katherine Black (@Kat_Black) January 29, 2018
“We do not want unaffordable housing to stifle further economic growth, or to put off the next wave of global businesses locating in these cities because they cannot attract long term workers. We need to start planning now.”
It’s not just cities with top-ranking universities that experience such trends. A US study published earlier this year also found that ZIP codes with a university present had higher than average house prices and rent. ZIP codes with a medium-sized university of 10,000–20,000 students recorded the highest rates.
According to the study by computer scientists at the University of California, Riverside, universities and hospitals are “opportunity hubs” with jobs, high wages and other amenities that can increase real estate value.
But along with this comes volatility. Prices in ZIP codes with a college and hospital present fluctuate consistently, increasing the risk for investors.
“One of the questions we wanted to answer is if the presence of a university or hospital would have a stabilising effect on prices in the event of a crisis like the 2008 housing market crash,” said Vagelis Hristidis, Professor of Computer Science and Engineering in UCR’s Marlan and Rosemary Bourns College of Engineering. “What we found is actually the opposite. Investing close to a university or hospital may not protect you from price volatility.”