Returns on student housing double in London in 2011

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Strong demand and undersupply will see student housing remain one of the UK’s best property investments, according to Knight Frank

Knight Frank Student Property
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.

-     Returns have almost doubled year-on-year in London

  •         UK Higher Education remains a global draw
  •      Regional cities with multiple universities will remain a sound investment
  •      Tuition fees will not depress the market

Returns
Returns on student housing have nearly doubled year on year in London jumping from 8.4% in September 2010 to 15.1% in September 2011, according to Knight Frank’s annual student accommodation index.

James Pullan, head of student property, Knight Frank, commented: “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 in the regions moderated from 14.6% in September 2010 to 10.5% in September 2011. Outside London, Mr Pullan says investment in towns which have more than one university with a high density of students can be the most lucrative.

As Knight Frank predicted last year, average rents in London rose in September, climbing to £14,313, up 9% from £13,121 last academic year. This trend coupled with the increase in Capital Values helped push total returns higher.

The average rent paid by students in the regions is much lower at £5,989, but that is still up 4% from September last year.

Will tuition have an impact on student accommodation?
Prestigious universities will benefit most from the introduction of tuition fees amid a “flight to quality” from students who will become increasingly discerning due to the capital outlay required to study.

James Pullan said: “The UK higher education sector is certainly facing challenges this year. The funding changes in respect of university tuition fees are dramatic. But 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 very best course available for their fees. We do not anticipate a fall in student numbers in 2012.”

Global student mobility
The report states that education is an increasingly global marketplace. The number of students studying outside of their own country increased five-fold between 1975 and 2008 and the figure is forecast to more than double by 2025.

The UK is well placed to take advantage of this trend having five universities which are ranked in the world’s top 20 universities according to the QS University rankings. [Additionally], overseas students have always had to pay fees to study in the UK and the weakness of the pound is cutting costs for them to study in the UK.

In a globally fluid and competitive higher education market the UK is perceived to a centre of excellence. That market is expanding rapidly alongside the corresponding demand for student accommodation.

To see the full report follow this link:

http://my.knightfrank.com/research-reports/student-property-report.aspx

For further information, please contact:
Alice Mitchell, commercial pr manager, Knight Frank, +44 (0)20 7861 5168
James Pullan, head of student property, Knight Frank, +44 (0)20 7861 5422

Ends

Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 242 offices, in 43 countries, across six continents. More than 7,067 professionals handle in excess of US$817 billion (£498 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit http://www.knightfrank.com.
No:     12pr009

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Knight Frank Student Property Research Report 2012