News

Student accommodation is the UK's best sector

19th May 2011

The demand for student accommodation in the UK is booming and the sector has become the “best-performing UK property investment sector,” says a new report out this week from global agency Knight Frank.

James Pullan, Knight Frank's head of student property, told OPP "there have been record applications for University places in the UK this year and once again students will find there is an under-supply of student accommodation to meet their needs. The student accommodation sector is now recognised as forming a critical component of a balanced investment portfolio.”

And it is the UK’s leading regional cities that present the best opportunities says Pullan. “The Knight Frank Student Property Index is the only investment index in the sector that demonstrates investment performance of this specialist asset class,” he says, and “total returns in 2010 for student accommodation in the regions outperformed all other property sectors.”

“Knight Frank has identified the 20 top University cities across the UK and ranked them according to investment potential. With 40 higher education institutions, London has the highest concentration of students in the UK, but a structural undersupply of student accommodation providing value accommodation at an affordable rent.”

According to Pullan, Knight Frank estimates that “London needs a further 100,000 student bedrooms."

Key findings in the “Student Property 2011” report include:

· Student accommodation in all of the UK the regions (England and Wales) outperformed all other property asset classes in the year to December 2010, with total returns (income and capital values) of 14.65%, against London’s 8.41%

· Average rents in regional cities rose 4.1% over the period, while London fell by -3.6%

· The strong performance of the regions is being driven by the imbalance in supply and demand – the Knight Frank Student Property Report Spring 2011 points to Kingston, Brighton, Edinburgh and Durham in the top ten locations to invest

· The Browne Review is expected to lead to an ‘application race’ this year, with students motivated to secure places before the impending rise in fees from September 2012. The most recent application figures from UCAS (April 11) show a 7.7% increase in interest from non-EU students

· Knight Frank also expects that universities will begin to market accommodation stock to the private sector, raising in the region of £500 million over the next five years.

Ray Withers, director of agency Property Frontiers, which has marketed student accommodation projects in Liverpool, told OPP “the returns that purpose-built student accommodation can yield vary geographically and the Knight Frank Student Report 2011 confirms this. In Liverpool, home to three of the country’s leading universities and some 53,000 students, rents in the last academic year, 2008/9 – 2009/10, increased by 13%, vastly exceeding the average 5% growth per annum seen nationally in the six years to 2008/9."

“Furthermore with Liverpool’s universities expecting to attract high numbers of applicants for the next academic year, 2011/12, many from overseas, this regional city presents strong demand for student accommodation and in turn an attractive opportunity for buy-to-let investors.”

Despite rising student tuition fees, UK universities have never been more popular. According to data from the Universities & Colleges Admissions Service (UCAS) demand for academic courses is at an all-time high with nearly 700,000 university applications in 2010, 210,000 more than the undergraduate places available with “significant” rises in demand from the EU, the Far East and Hong Kong between 2010 and 2011 says Knight Frank.
Property Frontiers, Hatton Garden development is located only a few minutes' walk from Liverpool's John Moores University, Lime Street railway station and the city centre. It offers 98 private ensuite student rooms with flat screen TV and internet connection within a refurbished early 19th century building. Rooms are available at £48,000 and investors can expect double-digit returns of 10.03% in year one says the company. Monthly rental income is guaranteed to be paid from 1st March 2012.