Student housing passes the test
Student accommodation is a niche investment area that private investors have been eagerly studying. Backed up by statistics that any professor of economics would be proud of, the market seems to be immune from pressures faced by the wider property market. But how much longer can this out performance continue?
The recession has boosted university applications, with admissions service UCAS reporting a 12 per cent rise in applications for the 2010-2011 academic year. Since 1996, student numbers have maintained an annual growth rate of 2.5 per cent (see graphs below). With universities unable to provide sufficient accommodation, values and rents in the rapidly growing private sector are rising.
Research from Knight Frank shows that rental growth is rising at the rate of 5 per cent per annum for operators of private halls, and restricted supply is one reason for this sustained increase. “Only 26 per cent of London’s higher education students are able to access halls, and only 3 per cent have access to private-sector halls,” notes Knight Frank partner Tim Goddard. “This is a substantially lower proportion than other major cities.” …