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New index shows growth of student accommodation

Thursday 29 November 2018

Capital values in the UK’s student accommodation market have increased by 6.5 per cent year on year in the 12 months to September, a new analysis shows.

This is up from the 4.5 per cent recorded in the previous 12 months, as figures from the CBRE index also show that on a gross and net basis, rents rose 3 per cent and 3.4 per cent respectively.

Jo Winchester, executive director of student accommodation valuation and advisory services at CBRE UK, a real estate services and investment firm, says the first published student accommodation index demonstrates the continued strong performance of the sector.

“UK student accommodation is now firmly established as a mainstream investment sector,” she said.

“Investors will find the increasingly sophisticated raft of influences on performance highlighted by this index, including location, asset scale, university rankings, applications, and distance to university very informative.”

In central London the student market outperformed the regions with capital value growth of 12.4 per cent.

Central London student accommodation annual total returns reached 17.5 per cent for the year to September 2018, compared with 14.2 per cent for the previous 12 months.

Meanwhile, the regional student accommodation annual total returns in the 12 months to September 2018 were 10.5 per cent, with capital growth of 4.5 per cent.

Outside central London, student accommodation situated in super prime towns reported capital growth well above those in prime regional and secondary locations at 11.1per cent compared with 6 per cent and a fall of 9 per cent respectively.

While gross rental value growth was positive in all three categories, net rental value growth showed much more of a divergence.

Net rental value growth in super prime and prime regional towns in the 12 months to September 2018 was 3.6 per cent and 3.9 per cent respectively.

In secondary locations, net rental value decreased 1.5 per cent over the year.

Richard Truman, Head of Operations, at Simple Landlords Insurance, said: “Student accommodation is an increasingly popular and attractive option for buy-to-let investors.

“In principle it’s a sound investment strategy as returns are good and yields are high - but you do need to be careful where you invest

“Not each university town, or city, is equal in yield or return. Each is different, so do your research before investing as they will pay off in the long run.”

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