The UK student accommodation sector will see rents continue to rise next year despite an increase in fees expected to reduce the number of Britons going on to higher education, according to a CBRE report.
Rents for student accommodation last year increased by 5% in London and 4% elsewhere in the UK.
CBRE residential research head Jennet Siebrits said the sector would see similar rental growth in 2012 because fee increases would not necessarily reduce the size of the market.
Report authors Siebrits and Helen Gray added: “Rather than an overall decline in student numbers, we anticipate that it is more likely to drive a shift in the type and composition of the student population.
“There is still strong underlying demand for good-quality accommodation. Indeed, the provision of suitable housing should be even more of a priority of universities as they seek to improve their offering to complete for high-calibre students at an international level.”
According to the report, the increase in fees will change the composition of the student population toward a 3-6% increase in the number of overseas students in the UK.
At the same time, although investors will continue to target student accommodation as more attractive than other asset subclasses, they are more likely to focus their attention on well-located schemes with long-term agreements with first- and second-tier universities.
Specifically, with banks becoming more selective about lending, the report’s authors believe the non-availability of debt will create opportunities for new entrants to secure long-term investments with reliable income streams.
Real estate investors committed £840m (€1bn) to student accommodation last year, not least because it offers stable income compared with other real estate asset sub-classes.
Institutional halls of residence currently house 19% of the student population, roughly the same percentage of students living with their families and significantly lower than the 27% in the private rented sector.