Student landlords face greater competition for students as affordability pressures shape demand for purpose-built student accommodation (PBSA), research reveals.
Knight Frank’s latest UK Student Accommodation Outlook found that the sector’s rent growth slowed to 1.5% for the current academic year.
However, university-owned accommodation enjoyed growth of 4.3%, with private direct-let PBSA rents falling by 0.7%.
It was the second year running that university-owned accommodation had performed more strongly than the private sector.
Student accommodation investment risks
Katie O’Neill, associate and global living sectors lead at Knight Frank, said: “Accommodation is now central to how students choose where to study, with availability, cost and quality all playing a part.
“Universities face difficult choices of their own, as restructuring and mergers become a mainstream response to fiscal pressure.”
She added: “For investors, institutional resilience is now as important as student demand.
“Assets tied to a single financially challenged university, or to a campus that could be rationalised, face growing occupancy and nomination risk.”
Accommodation costs influence students
Nearly nine in 10 students said accommodation costs were important when choosing where to live, according to the firm’s Student Accommodation Survey, which was conducted by UCAS.
It found that 84% of respondents said the price and availability of student accommodation had influenced which institutions they applied for.
Asked about staying beyond their first year, 74% of students said they would prefer living in the PBSA if the rents were more affordable.
Student accommodation and wellbeing
Nine in 10 students say their living environment impacts how they succeed academically, while 88% say where they live has an important part to play in their wellbeing.
A third said they were using AI tools to help them find student homes and track rents.
Meanwhile, incentives for the advertised annual rent at schemes with availability last month accounted for 4.7%, up from 4.2% last year.
Student housing attracts investment
UK PBSA has seen £2.7 billion invested so far this year, with around £1.5 billion of assets under offer.
The research found that interest in these assets under offer is being led by North American investors.
Merelina Sykes, the firm’s joint head of student property, said: “Despite a more complex market this year, investor appetite remains prevalent, as demonstrated by the volume of assets currently being traded across the sector.
“That said, performance is becoming increasingly nuanced.
“Rental growth is no longer being delivered uniformly across the market, with affordability pressures, changing student priorities and growing competition placing greater emphasis on factors such as asset quality, location and operational strategy.”
The research lands as the number of applicants for study visas in the year to September fell 20% year-on-year to 303,200.
The consultancy says this reflects recruitment pressures and ongoing policy uncertainty across higher education institutions.
Student letting decisions
Simon Thompson, the managing director of Accommodation for Students, said: “Price-conscious students may favour cheaper university rooms, putting private landlords under pressure.
“Before setting rents, student landlords should compare nearby alternatives alongside any advertised incentives.”
He added: “From Knight Frank’s research, it appears that retaining existing occupiers could require keener pricing rather than relying upon annual increases.
“Student landlords should also assess individual institutions’ financial health when considering accommodation purchases.”
