In the first nine months of 2013, more than £1.6 billion was sunk into student housing by individuals and institutions, according to property consultancy CBRE.
And with an average yield of 9.9% student housing is returning more than commercial property such as retail, offices and industrial premises.
The CBRE report points to continued government investment in higher education as underpinning investor confidence in the sector.
In addition, in his recent Autumn Statement, the Chancellor George Osborne announced that from the next academic year an additional 30,000 university places are being made available.
He also announced that from 2015 the cap on places will be dropped altogether which will see yet more students attending university and needing accommodation.
Student housing accommodation: the booming sector
Jo Winchester, from CBRE’s student accommodation team, said the announcement is a signal that the student housing sector will see higher growth.
She added: “We are expecting the number of students from overseas coming to the UK to grow by between 15% and 20% in the next five years.
“More than £10 billion is already spent by international students on tuition and living expenses and there is a demand for students across the world who are attracted to English-taught degrees.”
This high level of demand means that there are high occupancy rates in student residences which leads to stable incomes and helps to make the sector an increasingly attractive prospect for small and large investors.
There is healthy growth in the student housing sector across the UK with rental values for accommodation in regional towns increasing by 3.5% last year.
The boom in student accommodation provision is likely to continue with major student housing operators investing heavily in the sector.
Foreign investors pile into student accommodation
For instance, the US firm Greystar has bought an Opal portfolio for £310 million while Campus Living, an Australian outfit, is thought to be the preferred bidder for a portfolio of 4,539 beds which had been run by Opal.
The CBRE report makes plain that this is a good time for investors to move into the sector and even though most of the growth, fuelled by demand from foreign students, is in London, their Student Housing Index has shown total returns of 9.95% between September 2012 and September 2013.
This is the third year running that the index has outperformed the IPD All Property Index which has been supported by strong capital value growth in the UK’s towns and cities.
