Higher rents and increasing yields are making student property investments hard to ignore, according to new research.
Massive demand and a shortfall in places offered in university halls are pushing up rents across the UK – mainly driven by overseas students seeking a British degree.
Real estate firm Knight Frank is predicting that yields will rise by 0.4% to 9.2% within the next year as demand for beds outstrips supply.
Student housing investors in London could see rents jump by 3%, while those outside the capital could see rises of 2.75% in the next academic year.
The firm’s James Pullan said: “The stability of student demand for bedrooms all over the UK helps to make student property a successful real estate asset class, especially since most university cities are under supplied.”
Degree of success
Knight Frank points out also that the UK still has an enviable position as being well thought of for higher education around the world which is continuing to attract students.
To underline the prospects for student housing property, consultants CBRE believe rents will go up by an average of 1% in the next year, compared with a 5% rise last year.
They also say the prospects for student accommodation providers in London is going from strength-to-strength, with Camden and Islington leading the way as the most popular areas for new development.
However, tighter planning controls in these boroughs are forcing landlords and corporate investors to develop elsewhere, particularly Lambeth and Vauxhall, and there is increasing interest in Ealing, Fulham and Hammersmith.
Investors are increasingly attracted to the capital, despite a 10% fall in student numbers this year, according to CBRE, which says the tuition fee hike from £3,000 to £9,000 plus the cost of London living is to blame.
However, London universities say their applications will increase next year though nearly half of all full-time students will live with parents or in their own homes.
There will be around 95,000 students looking for private rentals, which brings opportunities for smaller landlords and developers as planned new student halls will not be available for several years.
In their report, the firm says landlords should choose locations close to campus in areas with good public transport links.
By doing so, they say, landlords will protect their investments as competition hots up for the best properties.
This is an issue also highlighted by Knight Frank, who say that a significant number of new investors are entering the student market.
Mr Pullan said: “There is already a substantial amount of equity, mostly international, chasing these student property assets.”