The returns generated by London student property investments almost doubled in 2011, compared to the previous year. This is according to Knight Frank, which revealed a lack of supply in the real estate sector, coupled with strong demand, has helped push this assets class forward. The organisation noted returns from student property in the UK's capital have risen from 8.4 per cent in September 2010 to 15.1 per cent in the same month last year.
Head of student property at Knight Frank James Pullan stated further rental growth in the sector is expected over the coming 12 months, with "rising global interest in the UK's educational excellence" another factor helping to boost the student accommodation market. "The growth in the capital has been fuelled by the particularly robust performance of the core market, and more specifically, accommodation with rents of less than GBP 220 per week," he asserted.
While London is undoubtedly outperforming the rest of the country in the student accommodation sector, regional markets still offer good returns to investors, the Knight Frank report added. Total returns for the regions stood at around 10.5 per cent for the 2010/11 academic year, a slight drop from the previous 12-month period, but still "robust", the firm said. Looking ahead, the organisation highlighted the potential impact of higher tuition fees, which will be introduced at the beginning of the 2012 academic year. However, the firm does not expect this to have a detrimental effect on investment in student property due to the undersupply present in the market.
Mr Pullan noted there are some locations that will benefit more than others from the rising cost of higher education, though. "The winners from the new tuition fee regime will be the most prestigious universities amid a 'flight to quality' as students search for the very best course available for their fees," he commented. A report published last year by Savills identified 40 higher education establishments out of 114 universities surveyed as "first-class" institutions. The student housing market in these areas are expected to thrive, however, the organisation revealed there are ten locations it would advise investors to avoid, due to the likelihood of student numbers falling and demand for properties therefore waning.
