Solid Growth Forecasted for “Structurally Undersupplied” Student Accommodation Market

Rental returns in the student accommodation sector are predicted to grow in 2014, as the market remains “structurally undersupplied” according to the Knight Frank 2014 student property report.

Solid Growth Forecasted for “Structurally Undersupplied” Student Accommodation Market

Rental returns in the student accommodation sector are predicted to grow in 2014

The newly-released report forecasts that rents will grow by 2.75% in the regions and 3.0% in London throughout 2014, as the result of a number of trends which are set to further boost the market next year.

The most important of these trends is Knight Frank’s projection that domestic, EU and international student acceptances are set to rise in excess of 3% in September 2014, predicting more specifically that the numbers of international undergraduates, labelled as a major driver for the development of purpose built student accommodation (PBSA), are set to rise by 3% in September 2014.

This rise in numbers is certain to compound the shortage of student accommodation which is prevalent throughout the UK, with all core markets remaining structurally undersupplied. This chronic undesupply is a result of university halls of residence typically only providing accommodation for less than a quarter of their total student intake and PBSA providing even less accommodation in the majority of the UK markets.

This undersupply, only intensified by the projected rise in student numbers, is set to increase investor confidence throughout 2014, with the 100% letting figures, which are currently a feature of all the UK’s core markets, set to remain for the foreseeable future.

Knight Frank also predicts that these factors will lead to a rise in investment in private student accommodation from more diverse sources including the US and the Middle East throughout 2014.

The sector’s overall results for this year are also revealed in the report, with investor returns totalling at 7.8%, outperforming every other property asset class in the year to September 2013

Rental growth rose 1.73% in London from the previous academic year, and grew at an average of 1.55% across the regions, with Bristol, Edinburgh, Cardiff and Liverpool identified as the highest-performing cities with returns of 3% and 4%, as a result of an acute undersupply of accommodation.

This year’s results also show that studio rents have grown marginally quicker than rents in en-suite cluster flat bedrooms, a measure of the attractiveness of the studio product to overseas students.

To read the full report click here.


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