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UK Student Rents To Rise By 3% in 2014 According To New Report.

Published: 1st November 2013

UK Student Rents To Rise By 3% in 2014 According To New Report.

Student rents should rise by nearly 3 per cent in Britain next year, according to a new report by broker Knight Frank that highlights London, Edinburgh, Newcastle and Bristol as the most acutely undersupplied student markets in the UK.

The report focuses on the market for so-called "purpose-built student accommodation" - big private halls of residence let at premium rents, often to international students. Knight Frank expects demand in this niche property sector to be underpinned both by the rising global popularity of Britain as a place to study and by market share gains, as shiny en-suite towers attract students out of draughty private-rented stock. The difficult planning environment should also help rental growth for existing stock - councils are increasingly hostile to student developments, which are assumed to yield noise rather than council tax, voters and affordable housing subsidies.

This sunny prognosis follows arguably the most difficult year in the sector's brief history. Student numbers dropped in 2012 following the upheaval in the funding regime - including the high profile fee hike - which prompted some universities to scale back undergraduate offers. Rental growth dipped to 1.6 per cent. At the same time, a refinancing deadline on an unsustainable debt load pushed the third largest operator, Opal, into administration in March. Another player, Brandeaux, stopped meeting redemption requests from its £880m student accommodation fund.

Most of these problems have now been resolved. Student numbers bounced back this month, and the £1bn Opal portfolio is finally being sold. Bidding has been intense, particularly from US investors, suggesting the administrator is likely to achieve asking prices. That makes it all the more puzzling that Brandeaux this month announced a 4 per cent write-down in the value of its property assets. The fund remains gated.

The success of the Opal sale will be a boon to Unite Group (UTG), the largest operator of purpose-built student housing. For buy-to-let landlords the message is more mixed. On the one hand, the feverish interest of global investors in UK student housing is a sign of the sector's long-term health. On the other hand, these new operators see an opportunity to take market share from the private-rented sector.

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