Student housing yields have almost doubled in London, according to the latest market report from property specialists Knight Frank.
The latest figures show returns on investment surged from 8.4% in September 2010 to 15.1% at the end of September 2011.
The firm reckons strong demand and an undersupply of housing from universities and private halls will see student letting stay as one of the best property investments despite rising tuition fees.
James Pullan, the firm’s head of student property said: “Limited supply coupled with rising global interest in the UK’s educational excellence points towards further strong rental growth in the sector.
“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 £220 a week. This is also the rent bracket where rooms were filled most quickly, signalling a strong depth of demand.”
Returns outside the capital slipped in to reverse compared with those in London dropping from 14.6% in September 2010 to 10.5% in September 2011.
Average London rents were also up in September, hitting £14,313, up 9% from £13,121 last academic year. This trend combined with rising property values to push yields higher.
Rents outside London are much lower - at at £5,989 up 4% from September 2010.
Pullan said: “The higher education sector is certainly facing challenges. Funding changes in respect of university tuition fees are dramatic. The impact of the changes will be similar to a graduate tax, as students will not be required to pay back loans for tuition fees until they earn more than £21,000 a year.
“The winners from the new tuition fees regime will be the most prestigious universities amid a flight to quality as students search for the best course available for their fees. We do not anticipate a fall in student numbers in 2012.”
The report also revealed education is a global marketplace. The number of students studying outside of their own country increased 500% between 1975 and 2008 and the figure is forecast to more than double by 2025.
