Rental growth in the student accommodation sector remains robust, recording a growth of 5% a year over the last six years, compared to 0.6% for commercial property, according to Knight Frank.
In its latest report on student accommodation published today it said the market demand for university places continues to rise. Preliminary figures suggest a further increase in demand for places in the 2010/11 academic year, with UCAS reporting a 12% rise in applications at its October deadline.
Knight Frank said its 2010-11 early indicators show that student rents will continue to rise by 5%, in the ensuite market and high-end studios, particularly those in London, will remain static without any falls.
Knight Frank said the substantial falls in land values since the peak of the market places equity rich developers in an advantageous position when considering investing in this undersupplied sector. “There is still a willingness by the banks to lend at around 60-65% on student projects, which is good when compared to lending on other property classes and increasingly there is the opportunity to acquire sites in locations previously considered too expensive for student housing, it said.
Tim Goddard, partner, Knight Frank student property, said: “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.”