Student housing in Hungary is booming, according to a recent report by CMS , and it could well be the next boom in the CEE region.

Student housing has become a distinct asset class, meeting its own unique needs. It is also less responsive to economic cycles, particularly compared to commercial spaces.

Investments in student housing are commonplace in Western Europe. Among the various markets, the UK is the leading market.

This asset has been the subject of significant investment since 2008, reaching 4% of all investments in this market. No other European country has approached this investment threshold.

What is the situation in the so-called CEE (Central and Eastern Europe) countries? And what is the situation of student housing in Hungary specifically?

As analyzed in The Real Estate Compass report on the CEE region , many factors point to a significant development of student housing in a period of 4 to 8 years in this region.

Student housing as an asset in its own right

Analysis of these different markets in Western Europe has shown that, despite the increase in price per unit, yields have been maintained.

The report highlights several implications:

• Rents have kept pace with the increase in unit prices, maintaining a solid return on investment.
• Compared to other asset classes that have increased significantly since 2009, student housing is now less expensive
• The performance of student housing tends to demonstrate that the risk of this asset class is low, even during periods of economic turmoil such as the 2009-2012 period following the financial crisis.

These characteristics point to a sector described as “counter-cyclical”:

"Student activity and spending do not change with the economic cycle. Thus, demand is not correlated with that of sectors more linked to faster GDP growth, for example offices or the industrial sector.

These features are worth examining now, given that GDP growth estimates for the eurozone (and other countries around the world) are falling and the risk of recession is increasing.

Economic growth may well be slower for the next two or three years, much like the weak cycle period seen between 2000 and 2002, rather than the sharp collapse and recovery of 2008-2009. This makes this asset class all the more attractive compared to commercial real estate, for example.

Factors favourable to investment in student housing in the CEE region

Student accommodation in Hungary: a lack of quality

The various surveys carried out tend to demonstrate the overall dissatisfaction of students with the quality of accommodation offered.

Moreover, forecasts for 2028 suggest a shortage of student accommodation in Warsaw, Budapest, Prague and Krakow:

"The current supply of student housing in the main markets of Central and Eastern Europe is very limited. 20 properties exist and only eight more are under construction.

A lack of affordability, the availability of cheap but poor-quality private housing and state-owned dormitories, and tight university budgets have hamstrung development in the past.

A major demographic shift, with a growing proportion of foreign students, is gradually shifting expectations towards international standards."

The increase in the number of international students

International students play a key role in the demand for quality student accommodation, including in Hungary.

These students are moving more towards countries in the CEE region, which offer affordable living costs and renowned universities.

This rental clientele arrives in these countries with high expectations regarding their accommodation.

However, these students arriving in Hungary for full-time courses often complain about the quality of housing. The average standard of student housing in Hungary remains quite low despite recent developments.

It is in this sense that we are developing numerous investment projects likely to meet the expectations of this rental clientele with specific needs.

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