Current estimates suggest that total investment in purpose-built student accommodation this year could reach a level of £6 billion.
Rising student numbers have been steadily pushing up demand for student accommodation in all its forms for a number of years now, and demand for purpose-built student housing has grown all the faster on the back of an increasing shift in student desires. Demand in the already undersupplied student market has grown significantly faster than supply.
The gap between supply and demand has been rising all the faster as, despite lack of supply and increasing demand being identified as a problem by many local authorities, it is proving difficult in many areas to plan for adequate new development in the student sector. Competition for land and for properties that are suitable for redevelopment is growing fiercer, and development times are getting longer. As such, the supply of student beds in many key cities is finding it harder and harder to keep up with the pace of demand growth. Key locations such as Newcastle and Manchester reportedly have purpose-built student beds for barely more than a third of their student populations.
This lack of supply has proved particularly attractive to investors, as good-quality student properties have become easy to fill and high-yielding. Investors, both private and institutional, from the UK and a host of overseas markets have been pouring investment into the sector. Purpose-built student developments have proved particularly popular with investors, partly because they are proving increasingly popular with students. An increasingly discerning attitude among the student crowd and growing numbers of international students, who are often prepared to pay more for the advantages of purpose-built housing, are putting especially strong demand on this part of the market. This is serving to attract strong investment from investors of all types, in combination with other advantages such as affordable purchase prices and guaranteed yield periods.
Last year saw investors put £2.7 billion into the purchase of such properties, but that figure has been utterly eclipsed this year. The most recent year-to-date figures show that investment in the sector for 2015 has already reached the £4.5 billion, and this figure is believed to have plenty of room left for growth by year-end. Estimates for the total volume of investment this year in purpose-built student property investment currently stand around the £6 billion mark – more than double last year's figure.
A largest portion of this investment was made as a result of portfolio sales. However, 2015 has been an exceptionally strong year for the student property sector across the board, with heavy investment in both new stock and existing properties being resold.
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