2015 Will See Surge in Student Property Investment

Investors are increasingly looking for alternative property assets in which to invest, largely due to the fact that yields from prime traditional properties have shrunk as a result of price inflation. According to recent forecasts from consultancy Knight Frank, this year will see specialist property investment surge to a level of over £15 billion.

With student property representing one of the most prominent and popular investments in this category, it seems likely that the surge will be evident in the student accommodation sector. Recent years have already seen student property undergo a definite rise to prominence, thanks to sustained year-on-year yield growth and in particular rising rental returns.

Obviously this is not to say that student accommodation has experienced nothing but one long upward trend. There has been some shrinkage compared to the lofty yields that might have been achieved at some points in the past. Nonetheless, it is still entirely possible to achieve yields of 5-7% in the student market, and this looks likely to remain sustainable in the short- to mid-term future. With student numbers forecast to rise by up to 20% in the next couple of years, the current situation of high demand seems like it will probably remain for a while yet.

Last year, Knight Frank issued a report reaching some similarly positive conclusions about the student investment property market, many of which continue to stand. The report identified a situation of high demand and significant undersupply. Many students, it said, were forced to stay in lower-quality digs due to a shortage of properties in more attractive sections of the market. In particular, the report identified a need for more purpose-built student developments – complexes containing studio flats or “pods” which have been specifically developed with the student market in mind.

Last year’s report also identified a willingness among students to pay more for higher-quality, better-located properties – particularly those developed with their needs in mind. This has helped drive the increasing popularity of purpose-built student accommodation developments with both student tenants and investor buyers. Tailored to the needs of the student market and often occupying some of the best locations, these complexes have done a lot to step in and cater to demand.

With the student property market performing so well, and such high expectations floating around for its future, investors are continuing to take more and more interest in student accommodation. In 2015, investment in this sector is forecast to reach the £3 billion level.

According to Shaun Roy, Knight Frank’s Head of Specialist Property Investment, the continued rise in investor interest in student and other specialist properties “reflects the appreciation of these business critical assets which, when bought on sensible rent covers and on sound operational business assets, provide their owners with confidence in the durability of income.”

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