Investors sink £860 million in student housing honeypot

Institutional investors are still pouring hundreds of millions in to student accommodation in a bid to cash in on a shortage of homes and an increasing number of rich overseas students coming to Britain. The trend is for soaring increases of investment - hitting just over £860 million last year, £770 million in 2010 and around £400 million in 2009 - according to CBRE, a leading property consultancy. Investors target student housing because of a chronic undersupply of suitable accommodation and an above average return on investment compared with letting other property. CBRE head of residential research Jennet Siebrits said “Student accommodation is more attractive than many other asset classes in the current climate and we have seen increasing interest from relatively new parties seeking to diversify their portfolios. “While investor appetite will remain strong next year, it is narrowing its focus on well-located schemes that have long-running agreements with good universities." Besides pension funds and corporate student housing firms putting up money for new developments, CBRE says more wealthy overseas investors are entering the market where a minimal investment of £50,000 can generate a net yield of up to 9%. Occupancy rates run at an average 99%, which has triggered annual above-inflation rent rises of up to 5%. The returns far outstrip returns on savings and equities despite flatlining property values. Around one in five students live in corporate halls, which is roughly the number living with parents, while 27% rent from private landlords. "Rather than an overall decline in student numbers, we anticipate that it is more likely to drive a shift in the type and composition of the student population,” said the report. "There is still strong underlying demand for good-quality accommodation. Indeed, the provision of suitable housing should be even more of a priority of universities as they seek to improve their offering to complete for high-calibre students at an international level.”

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Siobhan Smith

Further reading

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