Student accommodation: A resilient and stable investment
Student housing continues to perform well for investors with higher yields than both residential and commercial property, according to the latest research by experts at estate agency Savills.
Its analysis of the market includes major pointers for would-be investors looking to tap into the student accommodation sector, where growth is expected to continue.
The property expert’s July 2013 report reveals the student housing market has “proven a resilient and stable investment” during the downturn.
Following the yield compression of the early to mid 2000s, average yields hit 5.75% in 2007, rose to 6.4% in 2009 and were 6.3% in 2012.
Savills’ research also looks at potential supply and demand for the coming year – and highlights the growing importance of overseas students, particularly from the Far East.
Its report says: “With the increase in tuition fees up to a maximum of £9,000 per annum for the 2012-13 academic year, university applications fell by 6.7% on the previous year but have recovered slightly (2.7%) for the 2013-14 year.
“However, demand from outside of Europe has continued to grow during this period, particularly from the Far East, which has seen average annual growth of 8.5% over the last six years.
“In terms of actual demand, the growth in student numbers at individual institutions is arguably the most important component, although it is also important to understand the demographic profile including if they are domestic or international and whether they are likely to form demand for bespoke student accommodation.
“The overall 0.4% fall in domestic student numbers between 2010-11 and 2011-12 was counterbalanced by a 1.7% increase in international students.”
Commenting on the report, Marcus Roberts, Savills head of student investment, said: “‘The provision of good quality, well managed accommodation is key to an institution’s ability to attract top class students.”
Earlier this year property expert Knight Frank released its forecast for the UK’s student accommodation sector. It predicted a 9.2% average blended investment return over the next 12 months.
James Pullan, head of Knight Frank Student Accommodation, said: “Student property is one of the most successful real estate asset classes, thanks to stability of demand for student bedrooms from all over the UK. The market is still structurally undersupplied in all core university cities.”
Portergate’s new luxury Riverside House hotel-class luxury student residence is within walking distance of the University of Salford, which each year attracts more than 3,000 international students from over 100 nations around the globe.