Housed: The Shared Living Podcast

The Future of Renting, Misleading Market Data (again), Student Financial Struggles and Smarter Rent-Setting Strategies

• Season 5 • Episode 3

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In this week's episode, Dan Smith, Deenie Lee and Sarah Canning discuss:
- The Future of Renting
- Misleading Market Data in Student Housing
- The Nuance Behind the Headlines
- Student Financial Struggles and Commuting Trends
- Smarter Rent-Setting Strategies

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Dan Smith is Founder of RESI Consultancy and Co-Founder of Verbaflo.AI Good Management.

Sarah Canning and Deenie Lee are Directors and Co-Founders of The Property Marketing Strategists - Elevating Marketing in Property.

Thank you to our season four sponsors:
MyStudentHalls - Find your ideal student accommodation across the UK.
Utopi - The smart building platform helping real estate owners protect the value of their assets.
Washstation - Leading provider of laundry solutions for Communal and Campus living throughout the UK and Ireland.

SPEAKER_02:

Hello everyone and welcome back to House the Shared Living Podcast. This is the third episode in season five, and we're delighted to be back once more with brand new content. The same sponsors that you know and love, and the same podcast hosts. And on that, I'm Dan Smith from Resi Consultancy and Verbaflow AI. I'm Dean Eli from the Property Marketing Strategists.

SPEAKER_03:

And I'm Sarah Canning from the Property Marketing Strategists.

SPEAKER_02:

And now a very quick word from our headline sponsor, MyStudent Halls.

SPEAKER_01:

Season five of Housed, sponsored by MyStudentHalls.com. List your properties commission free and reach thousands of students searching for their university home.

SPEAKER_02:

Dan and the team at MyStudent Halls have been supporters of House since the beginning. We're really grateful for their support. This is the time of year where you need to be factoring in those listing sites and that marketplace commission into your budgets. So don't forget to reach out to Dan and the team at MyStudent Halls to list your student properties. And also a huge thank you to Wash Station and Utopia for coming back and sponsoring House once again. A little bit more from them later on. So first of all, what have we been up to this week? Sarah and Deanny, I know you went to the Urban Living Festival. How was that?

SPEAKER_04:

Yeah, it was really good. And once again, as I think we talk about quite often, is that it's really good to get out of your sector, be with other sectors, and learn from a wider real estate sector instead of just staying in BTR, staying in PBSA or staying in your own little kind of echo chambers. It is really, really useful to get out and go to a real estate conference from a wider perspective and hear what's going on.

SPEAKER_03:

Sarah, what do you agree with that? Yeah, no, definitely it's um, you know, time is precious and there's lots of events, particularly at this time of year, and it's very easy, I think, just to say yes to the same events and meet up with the people that you know that you know that are familiar to you. I mean, to be honest, I we went straight into the first panel of of the day um at urban living, and I was immediately captivated because it was really talking about something um it was talking about the the coincidentally the placemaking of kind of universities and students in in a city. It was talking about urban living kind of generally, but the the panel was talking about that universities should start learning and collaborating with the BTR sector, not just PBSA. They were also talking about the significance of what huge unemployment could do to a university city should universities continue to struggle and you know potentially you know some of them cease to exist, because without universities, a lot of cities you know would face you know crippling unemployment, you know, and that's a reality. And then there was an interesting debate about what cities need to do to retain graduates, and there was a bit of a debate, wasn't there, Deanny? And there was somebody that was saying that Sheffield doesn't do enough to retain graduates, and then somebody was saying, well, no, they do, and they were comparing it to you know to Manchester from a graduate retention point of view. So that was was really interesting. And I know Deanny, you were quite interested in the redressing the balance discussion. I know we're going to come on to more about supply and demand in balance, but they they did cover for this as well, particularly around planning.

SPEAKER_04:

Yeah, I think what was really striking and interesting was all the issues across the wider real estate sector, is all the stuff that we talk about in PBSA. They're all suffering the same problems in terms of lack of innovation innovation. You know, we're not really developing new buildings for a modern age, we're just building the same thing time and time again. We've got these amenity-rich spaces which don't really align to what residents need. It looks great for marketeers, it kind of gives it a really shiny, nice building with all these great amenities, but the reality is that actually when tenants are moving in, they're not using those spaces. And obviously, affordability is a massive, massive issue. They did have a big discussion around planning and very positive view of where the planning system is going. Like it's still very much a broken system. Don't they didn't say it wasn't a broken system, it is a broken system, but it is becoming more efficient. But also that day there was data shared about the planning applications across the country, which is massively down. So Labour's big plan of building all these homes is being mired by the fact that no one's actually submitting planning applications. So is the system actually more efficient, or is it still just as broken, but they're just not dealing with the volume that they need to be dealing with or should be dealing with? And I think the other the other stat was that we are losing rental homes at six times the rate that we are building them. So that is a big impact on the rental living sector, and obviously that is largely impacted by HMOs.

SPEAKER_03:

I think what was interesting about the planning debate, they they said obviously, you know, it's it's looking up if you look at it just from a planning on paper perspective, but they did talk about the the cost of it as well, and that it's it's got to be it's got to go through planning and it's got to be profitable. I think that was the the kind of the quote from that panel as well. So that's probably why we're not necessarily seeing as many coming through. So yes, the planners can deal with it because there's less volume coming through. You know, would they be dealing with it as efficiently if the same volume was coming through that should be coming through? And I think everybody, there were lots of murmurings that probably not. So yeah, it was interesting. And then we had some PBSA discussions. I was drafted in last minute on a panel with Asile, her dad, Martin Pardo, and Hannah Schapat, sort of talking about how the PBSA product can influence the well-being of tenants. And then Deanny and I presented some brand new research about what students want from their accommodation that could disrupt and influence the PBSA product of the future. We haven't published it yet. Um so if you weren't there and would like a copy of the presentation, then get in touch. Um otherwise, we will be launching it in the next couple of months.

SPEAKER_02:

Nice. Yeah, I I think new housing minister Steve Reid has his work cut out for him because yeah, the planning system is utterly broken. The fact that we have less planning applications in the pipeline for pretty much everything. And there is a target of 1.5 million homes that they need to hit. There's massive attrition in the HMO market at the moment. And I don't say that lightly. There's a few people saying, Oh, show me this attrition, where is this? And then I speak to local councils and they're saying we are genuinely seeing the attrition in HMOs and student HMOs as well. So need to be really mindful of that. That that's all that's all potentially coming back to market. We have less rental properties, it's more difficult to build. So you know, this isn't just, oh, can we can we look at some marginal gains here? The government really need to be looking at serious root and branch reform of the planning system. Building safety regulator, Steve Reed's already said, we're gonna staff that up massively, we're gonna give it more, uh, give it more people, but are they gonna commit more than 300 planning officers, which won't even touch the sides as well? Like, there's just so much to run at. And I, you know, I I do think that PBSA is kind of is kind of forgotten about in a lot of that conversation. I think BTR and co-living is too, and it can provide a lot of the solutions there, as can single family housing, as can later living. So that the whole rental living sector really has got quite a lot of work to do on to go into the charm offensive with the government, I think. But we are seeing positive movement from the uh BPF, so British Property Federation and the PBSA Committee in particular, looking really positive there. Uh, Ollie Humphreys, the COO of IQ, is is chair of that, working very closely with Paul Watson. I think he's vice chair from now student living. So there should be some momentum there that starts to happen. Now, again, it's just getting the right people in the right room to really have that influence. But what I'm hearing from Steve Reed so far is that he is very open to these conversations. I would like to think that will continue and that the sector, the sectors that we work in, the shared living sectors, will be considered as much more a part of the solution, as it were. But anyway, that's a slight, a slight aside. And I know that planning was such a big part of the urban living festival. And on the same day, there was also another event going on. But let me uh just go to a quick break now so that we can talk about Utopia.

SPEAKER_04:

This episode is brought to you by Utopia, the smart building platform that helps real estate owners protect the value of their assets.

SPEAKER_02:

From ESG compliance to energy efficiency and resident engagement, utopia turns real-time data into action, making buildings better for people, planet, and profit.

SPEAKER_03:

If you're in asset management or operations and care about performance, utopia is your essential partner. Find out more at utopia.co.uk. That's uttopi.co.uk.

SPEAKER_02:

Now the other event that was going on at the same time as the Urban Living Festival was the LD event Living UK Festival held at the Oval. Now I was supposed to be on stage, but due to the impending arrival of baby Neil, as we're calling him, uh as a Gavin and Stacey reference, we're not actually going to call him Neil. No offense to any Neils out there, by the way. It's it's just purely something that keeps M and I entertained. Now, the LD events uh LD events are always very good value, very heavy investor focus, and I think there's more and more operators that are starting to turn up there. But it's also quite heavily attended by agents as well. And I think you know, there's there are quite a lot of studies out there in terms of the number of beds that we are actually needing to build in PBSA in particular, or the number of students that are chasing those beds in certain cities. And and uh a couple of the agents got a platform to do this. Now, even though I wasn't there at the event, I was getting messages and screenshots from people where they're you know literally taking photos of some of these presentations where agents are saying that you know we need 190,000 new PBSA beds by 2029. And the operators in the room are absolutely aghast at that figure because it's been a really tough year in PBSA, it just seems completely devoid from reality. And when you look at the likes of UCAS rolling back on the journey to a million, knowing that we're not going to hit a million applications uh a year by 2030, that it's gonna be probably closer to the 800,000 or so. Again, there's just not enough detail in the data for us to be saying, yeah, we need 190,000 beds because students don't just live in BBSA, and this is the biggest frustration that operators have, in particular with agents, and I know that I get, you know, I'm being accused of agent bashing pretty consistently, but that's because a lot of this data just seems like utter nonsense because it's not just the 190,000 figure that was quoted on screen at LD. It's another report that was released this summer for with 620,000 beds needed in PBSA by 2030. That narrative is is to be honest, laughable. Like to say that we need to build 600,000 beds, more than 600,000 beds by 2030 is is just absolute rubbish. It's been a tough couple of years for agents, I get it, but creating this uh wildly optimistic, you know, overly positive narrative. No, it's beyond that. It it's it's just nonsensical. It I just don't understand why they would move themselves completely away from the reality of the market and and just almost go out on a limb to say, yeah, it's not just 190,000 beds we need, it's it's 620,000 beds we need. But then is this that they're thinking, yep, great, the more we build, the cheaper the rents are, it's all good for the students, or is this because they get paid when a development starts or when an acquisition is made? And I think I know which one it probably is. Sarah, Deany, you know, we've we've talked at length about this, um, you know, the the sort of misleading data in PBSA in that sense. But yeah, what were your what were your thoughts on some of those figures that were being banded around?

SPEAKER_04:

Well, I think you know that we absolutely agree that it's dangerous and it's wrong and it's not really taking into account what we really know about the market. But, and I think I've said this before, is why are investors not asking the right questions? Why are they taking that because I kind of feel if agents are being pushed back by investors saying, well, what about BTR? What about HMOs? Where you know, there's these gaps in your data, so please can you explain these gaps? They wouldn't keep reeling out the same data because they'd they'd be pushed back like that.

SPEAKER_02:

But I I know what you mean, but I think the the the good news is I think that investors are asking those questions. These investors are they're highly sophisticated, they are they are not daft. They see that actually, yeah, this year's been quite tough in the market. Some of the newer capital might, you know, might not necessarily see quite how difficult this this year has been compared to other years. It's still, you know, the PBSA sector is still performing very well, don't get me wrong, but but yeah, I I think the fact that there's this complete mismatch between agents only talking about PBSA and most of the market lives in student HMOs. And then we have co-living, and then we have BTR, and then we have university halls, and then we have the rise of the commuter student. Now, there you know, there's more and more data coming out from individual universities and from national sources talking about the rise of the commuter student. It's something that all university halls are particularly concerned about. University housing departments really struggling to fill their beds this year. Not everyone, but I would say the vast majority have pretty significant voids in their uh university halls. And a lot of that, I think, is because it's become so expensive to go to university that students are questioning the value of actually moving away. And that's something that we really need to be mindful of. And when you have agents then saying, Well, yeah, just focus on the PBSA or just use the top line, you know, total number of PBSA beds and total number of students in the university to work out your uh your levels of supply and demand. I just think that you know the student-to-bed ratios are way, way off here, and we've got so much work to do to educate agents, and that is it's partly that we have to educate agents, I think, as a sector. And and that's again, that sounds really condescending because again, the agents are pretty sophisticated people. Most of them are you know surveyors or finance grads or whatever it may be, but it does feel like some of this research is being hijacked by pretty aggressive sales teams or you know, uh an overly yeah, an overly positive PR spin. And what we actually need is is some reality is for agents to come back into the room and really start to talk to operators so that they can talk with credibility to investors. Because some of the investors that I'm talking to are all are also now saying, have you seen this bullshit figure from the latest agent, insert agent name here? Uh I should just say there are some really good agents out there as well, but most of those are actually a bit more on the boutique side. So yeah, Sarah, what what what were your thoughts?

SPEAKER_03:

So I'm I'm a visual thinker, and when I see data like this, what I'm imagining is a society where all students are rounded up, they're taken out of their homes in HMOs, they're taken out of BTR, they're like ripped from their homes that they've been commuting from, and they're all rounded up and put into PBSA. In that situation, we probably do need more beds, you know, because if we're saying that all students could, should and would live in PBSA, then yes, we do need more beds. But that that isn't the case, and and it's naive, it's it's arrogant, it's it's stupid to think that that is the case. You know, we're still hearing about planning being submitted and approved in cities like Nottingham and Coventry. It's madness, it's like that's ridiculous. And you know, those those I was gonna say those poor investors, but you know, they're the misled investors, I don't know what the right word is, you know, are just not gonna get get a return on on that investment. And I don't know in what planet they would think that those cities need more beds at the moment. And the only reason they would is if every single student lives in PBSA, but they don't, and that's just not the reality of it at all.

SPEAKER_04:

But again, it's like all things, it's not one problem is gonna fix everything. This is about taking a holistic approach to actually what we're talking about here, and actually we might need beds, but they might not need to be purpose-built student accommodation beds at a certain price point. They might be a different type of bed at a different type of price point that lots of people can go and live in that helps solve our country's housing crisis, but also houses students, and I think this is, and I know we've said it time and time again, it's this segregation that is stifling our innovation, which came across in the Urban Living Festival, is very much that it it has a role, like like you said, Dan, the rental market rental housing has a role to play in a housing crisis, but we're not giving it the space it needs to do that. But the segregation that we're creating within it means that we're almost harming ourselves, and actually, there is ability for more homes probably in every single city in the country, but let's build the right things at the right price. So the range of people who need homes in that city can live there.

SPEAKER_03:

So if you yeah, taking my analogy, if you were to round up all the students from HMOs, you've got to provide something that replaces an HMO for them to be able to do that, and that's not just on price, but that's also on product. You know, the HMO product is distinctly different to the PBSA product. You know, if you want to take all of those students out of BTR and put them in PBSA, then you've got to build something that looks a little bit more like BTR and has flexible contract options like BTR, you know, because the students are choosing HMOs and they're choosing BTR, they're not being forced into them because there's plenty of beds available in PBSA and the students are choosing not to live there, they're choosing other options. So if you want to round all the students up and you know put them in PBSA, then it has to be appropriate for their needs, you know, and and that isn't the case. We know there's empty beds. If if there was such a shortfall, there would not be empty beds in PBSA. There would be waiting lists for every single building in the country.

SPEAKER_02:

Totally. And we we wouldn't be getting the calls that we are from you know some some pretty big operators saying, uh, yeah, how's everyone else looking? Because it's not looking so great for us. Now, there are some operators that are doing absolutely fine, but again, it comes back to what we said pretty much at the start of the year. And uh, you know, I I said on one of our previous episodes, you can have occupancy or revenue, but you cannot have both. And I think that stretches right the way across the sector now, up to premium, down to affordable. The issue is as well that we cannot build affordable. You know, we have to build premium because it's the only thing that stacks up, it's the only thing that is viable to get through planning, to get investment, and then it's a sliding scale. You know, if you were premium, you know, three, four, five years ago, you're probably not going to be premium now. There will probably be something more more premium than than than your specific asset, at which point you have to really think about how do I recalibrate rents. And then everyone below you that doesn't have as good amenities or services or brand as you has to then recalibrate their rents. And that's why I think there is this current period of complete recalibration. And I think that we're going to need to take that forward into rent setting, which we will come on to later. But before we do, I just want to talk about some other dodgy data because there was a B2C report that came out recently uh by Save Our Student. Now they published a report, it's got some really useful data in it about students and money and talking about parental contributions and work and living costs and spending habits and rent, most importantly, for us and for being a shared living podcast. But you have to be really careful with how you look at the data here, because you know, delve into it with caution, Sarah. I know you did a lot of the sort of research and and looking into that, but when you actually looked into the data and contacted them, what what did you find?

SPEAKER_03:

Yeah, so I was reading the report and I found it really useful. I think possibly I my attention was was Pete because of my stepdaughter going to university. So we were having a discussion about things that students pay for, parental contributions, and it had this survey had 1,151 responses. So it it counts as a a significant sample size, and a lot of it is useful, it's based on sentiment. So I I accept that, but they said that the average rent is£529 per month, and I kind of thought, hmm, that's interesting. Where did they get that data from? Um, so I got in touch with save the student and asked for their methodology because they hadn't published it in the report, um, which I found really surprising. Um, you know, we at the property marketing strategist we publish reports and we always put our methodology in we wouldn't have even considered not. And then they they gave it to me, they which was really, really helpful. But because of the way it's spread regionally, the sample size of responses from each region is very, very small. So if you can imagine they had 1,151 responses, but that's from students living across the whole of the UK. So for example, in Yorkshire, there were 6% of responses. You know, Yorkshire covers a lot of universities and a lot of big cities, but that's only 69 students that actually responded. And then they said that Belfast is the cheapest cheapest city for live to live for students, but only 1% of responses were from Northern Ireland. So that's based on 11.5 students, and Belfast may well be the cheapest city for students, but without caveating it with the data size, it's it's really dangerous, it's really sweeping. So I know that we're kind of you know on our high horse about misleading data for B2B, but I think it's kind of worse misleading students and parents on the data, to be honest.

SPEAKER_02:

Yeah, I agree. And I think one of the issues is that you know, Nat West either sponsor or commission this piece of research and then it spreads like wildfire. So, you know, it was quoted by BBC, Sky News, Telegraph, pretty much, you know, all of the all of the mainstream media news sources, and and that, you know, I think that's pretty dangerous because it it's just it's just not reflective of the market out there. Again, very similar, very similar problem. But yeah, they really picked up on that headline.

SPEAKER_03:

The the other thing that they didn't ask is which of who is commuting. So people's spending habits, if they're living with their families, is going to be very different from if they're living at university. So again, out of the 1,151 responses, is that if actually, I don't know, 20% said they live at home and pay no rent, that average rent that they've calculated is going to be far less than if they'd actually asked who's living at home and who's living away. And also um there were only 13% of international students as well that responded. Um, not unusual in a survey, but again, it just has to be caveated because that skews lifestyle and living costs because those international students won't have the parental contributions and support they might and they can work less because of their visas. So yeah, very, very nuanced.

SPEAKER_04:

What did you um totally agree with all that, but I just want to say there is also some useful information in there which I think is important to talk about and share because it is beginning to show how difficult it is for students to budget and live, and it's getting tighter and tighter. So I think 61% say they skip mills, at least some of the time to save money, 10% are using the food bank, which is up from 9% last year, 58% have a part-time job, 52% receive parental contributions, and 51% draw on savings. And I think the interesting thing for me is that more and more of them are moving to riskier or unconventional sources of income with things like credit cards, gambling six percent, drug trial six percent, and sex work two percent. So it we are beginning to see different sources of people trying to just make ends meet by whatever means, and some of those can have serious impacts for their later life if they develop, you know, a gambling problem, or build up loads of debts on credit card. And I think the other telling thing is around the parental contribution has dropped to£146 per month, which is the lowest since 2021. And the biggest squeeze is those from middle income households, which is probably those that are more likely to work in in previous years were likely to go and live away from home, but they're getting squeezed and squeezed further, which is probably where we're seeing this commuting uplift coming from. And 71% wish they'd better had better financial education in school, which I think we all agree with. We do need more of that to happen. So, yes, there, you know, it's always good to show methodology, it's always good to see sample sizes, but there is also some interesting data in there, and I think some some real pointers if you're looking at budgeting and you're looking for rent setting next year, is that money is getting tighter and tighter for these students.

SPEAKER_03:

Yeah, I had a really interesting conversation with a a mum friend who has a 16-year-old, and she's already saying, Well, I expect my daughter will be commuting, will be studying locally, and I said, Oh, well, you know, what brought you to that decision? And and she said, Have you seen accommodation costs? Like, there's no way that I could have thought that was like, Well, yes, I have seen accommodation costs actually. But you know, that's and I and I explained that there is differences in costs, that obviously she is a a single parent family, um, that she would be entitled to support and and help. But immediately there, you know, that she's 16, she's just started her her A levels, so she's she's not actually ready to make that decision. But as a family, they're already researching it and they're already coming to that conclusion, and that it's accommodation that is going to stop her going to you away to university. It's nothing else.

SPEAKER_02:

Yeah, I I get that. I'm having more and more conversations with people like that. And you know, you think about some of the solutions here. The gut the government, there's no way they could just stand in and uh step in and prop up universities, it has to fall on the student realistically. Uh, and uh and how the hell do you then level the playing field there and say, well, university shouldn't just be for the elites. And when I say elites, I mean purely the people who went to public schools. One of the one of the big issues we we've got is leveling the playing field. I think that's really tricky to do, and I think that students should pay for their university, but how you how you then make sure that university isn't just for private school, wealthy families is is very difficult. I I think there's a huge amount of work that the government needs to do, but ultimately we as a sector need to really have a and and I'm talking higher education, university sector and PBSA, you know, and the living sectors, we need to have a really serious look at how we're showcasing the value for students going to university. I think this is primarily something that sits with those universities because it it for me feels like it's time for a bit more flexibility and a bit of a innovative approach to look at maybe you do two-year degrees, maybe you do have more hybrid uh apprenticeship degrees or more hybrid degrees with uh work placements, etc. I think there's so much to run at there that we could have an entire series dedicated to solving that. So we'll move swiftly on. And now a quick word from our sponsors, Wash Station.

SPEAKER_00:

Washstation proudly sponsored this episode of Housed. We provide best-in-class laundry solutions that complement your buildings. Washstation. Smart, green, clean.

SPEAKER_02:

Thanks very much to John and the team at Washstation. We know that they have increased capacity for taking on new projects, so do get in touch with John if you are looking at laundry solutions in PBSA, BTR, universities, etc. They are already across the UK and Europe. So yeah, get in touch with them now. And then moving on to uh price setting, rent setting for this year. We know that it's this time of year where everybody starts to think, okay, we can move on. We've we've checked in most of our students, we've uh we've got the occupancy as high as we can, we've taken we know our revenue numbers, so what do we think about next year? It's also the time where investors look for those gains and to see how much the rent can be pushed. Now, the difficulty that we've got, I think, as a sector is that our analysis of our competition still isn't really up to scratch, I don't think. We've got some brilliant data providers out there, student, student crowd, student source, there's various others too. But you know, comparing with others is problematic when it comes to rent setting in a challenging market when people are typically hiding a lot of those costs of scale. So, uh Sarah, Deanny, I know you do a lot of work with um uh with clients' rent setting, as we do too. What are you seeing at the moment? And you know, how how can you know if your competitors are getting it right?

SPEAKER_04:

I think our frustration with rent setting is it's not done in a way that's nuanced, actually, what's going on in your local market. With your competitors around your property. I've always been a big believer it's the right product at the right price. And you know your product, you know your customers, you should know your price. Whereas I think so much of rent setting is done with a process that is let's say what everyone else is charging, but we don't really have the full data on what everyone else is charging because we don't really know what incentives they gave, what they gave away, what different things are. And it's so often done by people who are asset managers of a company and they sit in an office nowhere near the accommodation, nowhere near the customers, they aren't really speaking to the customers, they aren't walking around the local area to see what the competition is doing. And they look on a spreadsheet and say, Well, they've got these, these, these amenities, we've got these, these, these amenities. It doesn't matter which one's new amenities, which one's old, when the last time it was referred, it's just got the amenities. And then they give you a price, and invariably, you know, it's 3%, 5%, and we can push that to 10%. And there's just a total mismatch between actually what what is the product I've got here? Who is this product for, and who's gonna buy it? And what can that person, what is that price point for that person? What is the optimum price point for that person? And we're just not it doesn't feel that we're doing it in the right way. We're following a process we've always followed, and that's always worked because we've had the supply and demand metrics in PBSA right up till now, but it's not there. So we've got to be a bit smarter and we've got to look at all the data available to us, not just that building's charging this, so therefore I'm gonna do that.

SPEAKER_02:

Look, it it's a it's pretty volatile out there. Every market is performing totally differently. We are a very mature market here in the UK, arguably the most mature PBSA market in the world. And as a result, we now go through those cycles of almost boom and bust, where some cities will perform particularly well because the university will go all guns blazing for international recruitment or whatever it might be. And now we are, it feels, reaching tipping points of affordability where the last few years post-COVID, uh, we saw certain operators and certain investors really turn the screws on students. Uh, and I choose that phrase very carefully because they've some of them push rents double digits every single year for the last few years in certain locations. And those locations are the likes of you know, Glasgow, Edinburgh, parts of London, you know, really good examples. Some of these really core cities where everyone said, Oh, if Glasgow or Edinburgh or or London turn and start to become a problem with affordability, the whole market is going to really struggle. Well, that's exactly what is happening. And and I think we've made a rod for our own backs by that. There's a lot of recalibration that we're talking about in the market at the moment because we've pushed the returns and the revenue performance so hard over the last few years that it does need a recalibration. Like it's not sustainable to keep to keep sort of taking those 23% increases year on year, like we saw in Glasgow. That market cannot support that. Students cannot support that. So something has to give, and it's you can still make really good returns within PBSA just even by recalibrating and saying, okay, right, we did, you know, we did overall sort of last two years we did 40% total increase in rents. So why don't we actually just drop that a bit more this year? Because we've priced students out of certain cities, certain properties, and that's where this recalibration really has to come in. The other problem that we have as a sector is that every operator is hiding cashbacks, incentives, and commissions. And it's not, you know, it's not overt, they don't hide it from investors, but investors will typically say, no, keep the rent level high and let's fold all of these cashbacks and the rent discounts into a marketing budget. And that is the major problem that we have. The getting the visibility on those is really difficult. Student crowd do a really good job of tracking the incentives, they're not tracking the agent and marketplace commission. That's something that's a bit more nuanced in the way that it needs to be approached. It's something that we do a lot of. A RESI consultancy, working out who's paying what in the market, which markets are therefore struggling, who is dropping their rents by the back door early, and what does that mean for the rest of the market? So we track that all as we go, and we make sure that we are then feeding that back to our clients and investors to say, look, this particular operator obviously is seeing something in the market that we haven't seen yet. They've dropped rents, or they've added uh big incentives, or they've gone to these marketplaces and said you can have 10% cash back in a market that the average is sort of 5% at the moment. I think this year in particular, the aid uh the operators that have done well from an occupancy perspective dropped rents around April. And I'd say that is blanket across the board, across every city. If you dropped your rents early this year, you did really well. But what we've done with all of these incentives, and every single operator has big incentives now. You just literally type in student accommodation incentives, and almost every operator has a page that has all the cashbacks that they've got available. Is we have pushed students to choosing later on in the market. And what we wanted to do was bring them forward to front-load the market so we know what the occupancy is going to be relatively early on. But now we have much later markets, and there's no real demand. We didn't see a huge demand in clearing. So for these later beds, it's just been a real struggle. There's a lot of cloak and dagger going on. Deanny, what were you thinking?

SPEAKER_04:

I just wanted to say that yes, you're right that those that dropped their rents earlier performed better, but we still didn't get it right if we had to drop rents. We shouldn't be in a scenario where we have to drop rents. We should get the price right at the beginning, and then as you say, if you're then building up that occupancy, then you might have the opportunity to push rents again later in the cycle. But we don't want to be getting to April and advising dropping rents, we want to get the price right in the beginning and flowfully.

SPEAKER_03:

And you were talking about the things that are hidden. The other things that are hidden is cancellations and tenancy takeovers as well. And there is there is, you know, there is nowhere that you can get that data, but you have to assume that it's it's there, you know, and if you're pushing your students and it's a domestic market generally, a domestic undergraduate market or just an undergraduate market into 51-week contracts, you will be getting tenancy takeovers. And we've discussed before that that puts a huge amount of pressure on staff. So there's other things that are hidden, you know, also rebookers as well. So your headline rent might be X on a website that you're doing your competitor analysis from, but a lot of returning offers aren't publicised and nor should they be. Um, you know, they're the residents will get an email saying that they've got a rent freeze or they've got uh 500 pound cash back or they've got some other loyalty incentive. And if that's not publicised, then you're thinking that the rent is something completely different to what it is. So I don't know. I kind of think that as a parent, I tell my kids not to follow influencers, don't do what the influencers do. And in our sector, that's exactly what you're doing. You're just following somebody else. The other thing I don't understand, and we have discussed it before, is that rents are pushed higher and higher and higher and higher and higher every year. But the buildings are getting older and older and older and older. So you can't be comparing an older building with a new building, like Deanny said, just because on paper it has a cinema room, a karaoke room, and a roof terrace. You know, it's it's very, very different. So you have to get out and about. And also just want to say that most departments are not given the time and the resource to do this properly, which is part of the problem. So it's much easier just to say, we'll do what we did last year, plus three, plus five, plus seven percent, or let's wait and see what the neighbours do, and then we'll just do the same, because it's so resource-heavy to do a proper competitor analysis. And I don't think that's really appreciated.

SPEAKER_02:

Yeah, yeah, in all of our consultancy work, both at Resi Consultancy and at the property marketing strategists, we work with investors, asset managers, and operators. This isn't like an operator cartel that we're trying to create here to scare investors on behalf of operators and say, look, you guys are setting your rents too high. Please let the operators do their jobs. But we have to be really mindful of the fact that the operators are at the cold face. They fully understand what needs to happen in the market to get it to 100%. If they don't understand that, then you need to find yourself a new operator. And I think this is the challenge that we've got, where investors are thinking, well, how much can we push rents? Totally get that. Like that's that's part of the business model. They're trying to get the best possible returns that they can. Never mind pricing people out of the market. I think if you're pushing your rents double digits and you don't have a brand new property that was massively underrented in the first place, you are getting it wrong. And I think what we need to be doing is setting our rents low for now, you know, for literally launch time, keep them reasonably low and push those prices as you go through the year. Students are expecting dynamic pricing. We haven't been able to do that particularly well. We've got tiered pricing, and that's what I like to see. You know, I think that the later that you book, the more expensive it will be. I think there is that understanding of that because it links back to hospitality in particular. Now, when you're setting your rent so high and then, you know, actually thinking, right, we are well underoccupied in our bronze or platinum studios or whatever it might be, to then move in mid-market is horrible. And then you get you're left with voids later on, and you think, right, let me just put£1,500 cashbacks on. And we know that we've seen£5,000 cashbacks this year. I mean, that is just horrendous for the market, for the property, for the investor, for everyone linked to it. And I, you know, it, but that they're not alone in offering that. There are numerous properties offering well into sort of two, three thousand pound cashbacks, plus paying marketplaces an absolute fortune, 20, 25%. And this is the major problem that we've got because the prices were not sent effectively uh set effectively enough. And the demand was so volatile this year, and I think it will continue to be such, it is still going to be volatile next year. So I don't think there's any location where you can really count your chickens and think like you know, post-COVID Glasgow, where you can push your rents 23%. So for all those investors that are looking to really push their rents, please just think twice. I'm not saying it can't be done, because we know the returns are out there in some locations, in some properties for some brands, but this isn't just a blanket coverage. Yep, you can keep pushing your rents and expect uh expect normality. This new normalization in demand, as Unite have called it in their latest report, is not particularly pretty. And I think we need to all get rounds to you know come around to the fact that it's going to be pretty challenging. You're going to need to set your rents with the expectation that you will hopefully make some more money towards the end of the season if you can get to certain occupancy thresholds. That is the way that I would look at this year. But we know that it's rent setting time. Will that be uh will that be heeded? Doesn't matter to me either way. I make sure that you know I'm very clear with my investor clients that there are some locations that I just don't think they'll be able to push rents. There are some this year where I recommended double-digit drops in those rents. And that will continue. Some of my advice will continue to be drop those rents even further, because we've seen what happened with occupancy this year. We know that, you know, luckily my clients and I know your clients did very well, Sarah Deane, but it's it is just going to be more challenging. So please do set your rents very carefully and do listen to your operators. That's a sort of message to the investors and asset managers, I would say. And I think that is a wrap for this week. Uh, thank you very much to my student halls for being our headline sponsor for the season. Once again, your support is hugely appreciated. Many thanks to Dan and the team there. Uh, of course, thanks to Utopia and Wash Station as well for coming aboard again for season five. We are very grateful for your support. We hope you've enjoyed listening to this episode as much as we as we've enjoyed recording it. Do please get in touch with any questions, news, or views that you want us to be talking about. Uh, you can email hello at housepodcast.com or send us a message. And until then, thanks very much, and we'll see you next week.