Student landlords still have plenty of slack in the market despite millions spent on purpose-built halls by big corporate investors.
After years of development in university cities all over the UK, universities and their corporate partners can still only house around 30% of the millions of students seeking a place to live every year.
The latest study highlights the top 20 university cities in the UK for property investors.
London comes out top of the table - followed by Kingston-upon-Thames, Brighton, Edinburgh and Oxford to make up the top five.
Rents in the capital performed worse than the regions - showing 3.6% decrease against a 4.1% increase elsewhere.
The strong regional return is driven by strong demand and and undersupply of accommodation, explained property consultants Knight Frank in the firm’s annual student property report.
Although the study is packed with data for corporate investors, the market view is encouraging for private investors.
Knight Frank also predicts higher student tuition fees this year may have a short term impact on university applications, but the increase is unlikely to stop young adults going on to higher education in future years.
James Pullan, Knight Frank's head of student property said: "There have been record applications for university places this year. Once again students will find there is an undersupply of student accommodation to meet their needs. The student accommodation sector is now recognised as forming a critical component of a balanced investment portfolio.
“Total returns in 2010 for student accommodation in the regions performed well. Knight Frank has identified the 20 top university cities and ranked them according to investment potential.
“With 40 higher education institutions, London has the highest concentration of students in the UK, but a structural undersupply of student accommodation providing value accommodation at an affordable rent. We consider London needs a further 100,000 student bedrooms."
