Student property continues its rise in popularity as a UK investment market. No doubt this is driven partly by increasing rents as student numbers continue to increase with each new intake yet the market in most university towns remains undersupplied.
New data from prominent agency Knight Frank has shown that the UK student property market has grown by 37% over the past three years. UK student property had a total value of £30.9 billion in 2014, but the sector has now grown to be worth approximately £42.5 billion. This value places student housing as one of the largest emergent sectors of the UK property market.
This growth has been largely driven by major purpose-built student property developments in the UK’s key cities. The popularity of student property investment has grown to the point where these developments not get almost as much attention for the opportunities they offer investors as for the quality accommodation they provide for students.
Last year was an extremely strong year for student accommodation, with it being announced in December that the sector experienced £3 billion worth of transaction. In fact, 2016 was student property’s second biggest year yet, with 2015 remaining the biggest of all. Knight Frank expects the asset class to continue to be busy and high-performing this year. The property agent forecasts that by the end of 2017, there will be another 24,000 student beds made available for a total of around 549,000. From an investment viewpoint, Knight Frank expects continued interest from foreign investors, thanks partly to the sector’s growing reputation as a resilient one, and high levels of tenant demand from both UK and international students.
Knight Frank also predicts the sector will experience rental growth, and this would be nothing more than the continuation of a current trend. Separately, the agent reported that the rents attracted by purpose-built student accommodation have been showing steady annual increases for several years.
In fact, student property belongs to a very small group of property classes that have experienced positive growth in rents every single year since 2007. This upward trend is down to a number of factors. It has been driven in no small part by a growing demand base. The number of students has been increasing for much of this time, though did dip following the high-profile tuition fee hike, and students have also been increasingly looking towards purpose-built student property as they have become more discerning about where they live. Recent years have also seen an influx of higher-quality properties onto the market, as well as an increased number of purpose-built student units to reflect demand which are almost invariably higher-quality than the traditional shared family homes. As a result of factors such as these, the past five years have seen the average rent paid by students for specially-designed, en-suite accommodation rise from £120 to £143 per week.
