Student accommodation is best investment option
Monday, 16 May 2011 11:57 AM
Landlords and investors are making more money out of student accommodation than any other type of property, according to estate agent Knight Frank.
Its Student Property Report says rents delivered a yield of 6.25 per cent in the year to December 2010 while capital values rose 7.3 per cent – a total return of 13.5 per cent for investors.
A growing gap between supply and demand explains the increases: student applications rose 34 per cent in the year to 2010 while the number of available bed spaces only increased by 20 per cent.
Rents for students rose 2.2 per cent in England and Wales last year to reach an average of £178 a week for a studio and £112 for en-suite accommodation. Only London bucked that trend, with rents falling 3.6 per cent last year, but Knight Frank expects them to stabilise and start rising again from the start of the new academic year in September.
The estate agent says London remains the top place to invest in student accommodation, followed by Kingston, Brighton, Edinburgh and Oxford.
James Pullan, head of student property at Knight Frank, said: "There have been record applications for University places this year. Once again students will find there is an undersupply of student accommodation to meet their needs."
The big question now for landlords and students alike is what will happen when tuition fees increase in Autumn 2012.
Knight Frank expects that student demand will recover after a one-off dip next year and points out that the new funding system allows for a ten per cent increase in places over three years.
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