Corporate investment in UK student housing hit a record £2 billion in the first nine months of the year – a leap of 145% over the same period last year.
This huge cash mountain shows the faith money men have in the UK student accommodation sector, even though student numbers are falling as tuition fees rocket to an average £9,000 a year from £3,000 last year.
But although the student sector is awash with money, some new trends are emerging, according to property consultants CBRE, who research the market.
The firm has noticed that investors are moving their cash out of London to the regions – with more than half leaving the capital so far this year.
Focus has also changed from developing new halls to investing in existing halls – 90% of the deals were halls changing owners.
Banks won’t lend to developers
CBRE puts this down to problems raising development money from cash-strapped banks – in deed Barclays Bank has already sold a share in a student halls developer during the year.
The deals are also getting bigger – with five £100 million transactions so far in 2012, compared to the £85 million deal which was the largest in the third quarter last year.
Jo Winchester, Head of Student Advisory at CBRE, said: “Total returns remain a key driver for investors, as they flock towards the impressive returns given by student accommodation for a second year in a row.
“Our data shows that student accommodation is outperforming other asset classes by some margin, as it has brought 9.6% returns in the year to September 2012. This compares to 5.4% for all offices and 2.2% for all retail in the year to August 2012.
“The market is dominated 90% to 10% by investment deals, as the development market continues to suffer from funding constraints.”
The firm confirms investment interest in student letting is not waning, although student numbers are down due to fewer deferring from last year, fewer with AAB grades, and changing demographics.
“The student accommodation market remains attractive to domestic and more recently international investors due to the higher achievable total returns compared to traditional property asset classes, and as reported, consistently high occupancy levels across all operators for the 2011/2012 academic year averaging over 90%,” said Winchester.
The decline in student numbers is most acute in England – where tuition fees went up – rather than Wales or Scotland, CBRE research shows.
Acceptances for courses are 14% down on last year, compared with a 2% increase in Scotland, where home students are offered free courses.