Early indicators for 2010/11 show that student rents will continue to rise by 5 percent while high-end studios, particularly those in London, will remain static without any falls.
These are the predictions reported in the Knight Frank Student Property Review 2009 which said these findings compare favourably to other commercial rents, highlighting the student accommodation sectors resilience to the downturn.
So why has this sector remained so resilient? Student numbers have continued to rise and the total number of people in higher education has grown from 1.8million in 1996/7 to almost 2.4million in the academic year 2009/10, reflecting an annual growth rate of over 2.5 percent per annum, and this is forecast to continue rising.
The majority of key University towns reported nearly 100 percent occupancy in halls last year. This growth has been significantly influenced by a rise in overseas students which is predicted to rise more in the next academic year.
In October 2009 UCAS recorded a 16.6 percent increase in foreign applicants with the number of applications from the Republic of Ireland up by 43 percent and a 27 percent increase recorded from Chinese students.
Another key growth segment for operators of private halls is postgraduates. Both groups tend to favour the professionally managed sector and are less price sensitive than other student categories.
In 1997 these groups accounted for 11 percent (international) and 21 percent (postgraduates) of all students. Over the following 10 years these proportions increased to 15 percent and 24 percent respectively.
Student rents have continued to rise, growing by an average of 5 percent per annum over the six years to 2008/09. This is significantly more than other commercial property asset classes which averaged 0.6 percent.
Regional rental growth has also showed rises of as much as 13 percent in student rents in Bristol, Leeds and Liverpool, 12 percent rises in Nottingham, 11 percent in Cardiff and Leicester, 10 percent in Edinburgh and London, Birmingham and 9 percent in Manchester and 7 percent in Newcastle.
Tim Goddard, head of student property, Knight Frank concluded: “The underlying market fundamentals for the student property sector are positive, with supply restricted and strong demand underpinning rental growth.
“Given the lack of finance currently available for development and the constrained pipeline, rents are likely to continue to rise for the foreseeable future. There is strong demand for high quality, income producing assets and it is anticipated this will continue with increased appetite from investors for direct let stock.”
