Investing in student property in the UK set to bring 9.2% annual return
|Tuesday, 23 April 2013|
The student accommodation property investment sector in the UK is predicted to see 9.2% annual returns over the next 12 months due to continued demand.
This reflects an increase of 0.4% on London returns to 9.1%, due to rising rents in an acutely structurally undersupplied market, says the latest report from property firm Knight Frank.
Average rents are forecast to rise 3% in London and 2.75% in the regions from September 2013, according to its latest forecast for the student accommodation sector.
‘Student property is one of the most successful real estate asset classes, thanks to stability of demand for student bedrooms from all over the UK. The market is still structurally undersupplied in all core University cities,’ said James Pullan, head of Knight Frank Student Accommodation.
‘Student accommodation is a mid to long term investment play with current access to stock relatively limited, and the sector dominated by specialist providers and funders. There are barriers to entry for new operators, although a significant volume of new equity is entering the sector, looking for opportunities in the current refinancing climate,’ he explained.
Knight Frank forecasts a combined London and regions investment return of 9.2%, higher than most other asset classes. ‘This positive outlook is down to several factors including continued steady rental growth in all key English university towns, continuing undersupply, and the established perception of the UK as a top global knowledge centre,’ explained Pullan.
‘Other things we cannot ignore in the year ahead include significant volume of product entering the market. We are already seeing substantial equity, most of it international, chasing these assets and the first student property REIT recently launched and already finding keen interest in the UK and overseas,’ he added.
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