UK Student Housing: “Many Happy Total Returns and Signs of a Maturing Market” - CBRE

The UK student housing sector has once again shown strong returns sustained by continued rental growth and improved investor sentiment, according to CBRE’s report on UK student housing in 2013.

UK Student Housing: “Many Happy Total Returns and Signs of a Maturing Market” - CBRE

The report highlights that total returns for student property continue to outperform the IPD all property index, and the CBRE Student Housing Index has shown a national rental growth of 3.24% and total returns of 9.95%.

October 2013 UCAS figures suggest that nationally, university applications are now back above 2010 levels. A combination of higher tuition fees, disputed over A-level marking, and confusion over visas are just some of the issues which preceded a reduced intake of students into Higher Education in 2012.

However, the government, recognising the importance of the sector, introduced some key policy initiatives in 2013. In 2011/2012, overseas students paid an estimated £3.9bn in tuition fees and a further £6.3bn in living expenses. It has been estimated that numbers of international students in UK higher education could grow by up to 20% in the next 5 years.

To ensure the UK captures this demand, the government has reformed the visa system, and confirmed that there is no intention to impose any cap on the number of students who can come to study in the UK. Other policies included over-recruitment penalties being relaxed and up to 5,000 additional university places being made available nationally.

Reassuringly for universities and student housing operators alike, the number of international applicants is up by 10% on the previous year’s cycle and after two abnormal years in 2011 and 2012; student housing operators are all reporting high occupancy levels in core towns.

According to CBRE’s Student Housing Index, regional towns have shown average rental growth of 3.51% for 2012/2013, compared with a 3 year average of 3.36%. The report also said that high returns between September 2012 and September 2013 have been the effect of rental growth and some yield compression in better towns.

These total returns have been supported by strong capital value growth, particularly in regional towns and cities. The CBRE Student Housing Index shows that the average value per bed has increased from £50,700 in 2009/10 to £56,600 in 2012/12, an increase of almost 12%.

This has been partially as a result of investment and development of student accommodation in regional towns and cities. According to CBRE, for the second year running, investment into the regions has reached £1.5bn, with developers and investors seeing growth potential outside of London.


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