Investors commit to UK student market

By Bridging Loan Directory -

In spite of the gloomy economic climate, the student accommodation sector has remained extraordinarily buoyant, kept afloat by the imbalance of supply and demand of student housing felt in many university cities across the UK.

With the assurance of a guaranteed long-term income and appealing yields of between 5.25% and 7.00% depending on location and the leasing agreement, investors have been snapping up purpose built student accommodation residences, with an estimated £347,675,000 committed to the sector in the UK since the beginning of 2011 according to the latest report from CB Richard Ellis 2011.

Indeed, student numbers have been rising year-on-year over the last five years, increasing by 4% last year alone according to the CBRE report with the growth in university students putting considerable pressure on the existing student housing stock across the country.

The report highlights that there are around five full-time students for every bed-space available in Brighton and Hove University for example followed by a mere seven spaces in Dundee and nine in Glasgow.

Concerns over the impact on demand due to the forthcoming £9000 a year student tuition fees have been allayed as students will not need to pay any of charges up-front, a key factor in upholding existing levels of housing demand and ensuring upward pressure on rents. In fact, it has been suggested that the increased fees will place greater importance on value for money and improved quality with student accommodation playing a significant part in the overall university experience.

Jennet Siebrits, head of Residential Research, CB Richard Ellis said: “Accommodation will play an even more important role in a university’s overall offer as students’ expectations increase with their budgets which will see students demand high quality accommodation, a good service-led approach from operators and ideally, all-inclusive rent. Private developers will be relied upon to plug this gap, given that the universities will have very little capital to do so themselves.

“This should encourage more opportunities for developers to work closely with the institutions going forward, which will also prove helpful in the planning process.”

It is expected that demand for student housing will continue to remain resilient overall with the sector predicted to outperform most other property sectors by some margin and with investors and developers continuing to be attracted to the traditional university cities, predominantly those in the Russell Group which represents the 20 leading universities in the UK, there are plenty of investment opportunities to be had.