By The UK’s student accommodation property market continued to pick up with increasing interest from investors, as capital values increase 6.5 per cent year on year from September 2017, according to recently published research from the CBRE Student Accommodation Index.
The capital values in the student accommodation market rose 4.5 per cent since September 2017 and on a gross and net basis, rents rose 3.0 per cent and 3.4 per cent respectively. The annual total returns were recorded at 12.3 per cent from the period September 2017 to 2018 on a national level.
The recent data was divided into ‘Central London’ and ‘Regional’ areas, with the latter category being further split into ‘Super Prime’, ‘Prime’ and ‘Secondary’ by the new CBRE Student Accommodation Index.
When analysed further, student accommodation capital value in Central London outperformed the Regional capital value. As the capital value grew by 12.4 per cent, the student accommodation total annual returns in Central London were recorded at 17.5 per cent from September 2017 to 2018 compared to 14.2 per cent for the previous year.
Regional student accommodation reported annual total returns of 10.5 per cent between September 2017 to 2018, and a capital growth of 4.5 per cent.
Student accommodation located in Super Prime regions outside of Central London revealed capital growth of 11.1 per cent, which was much higher than compared to 6.0 per cent in the Prime Regional capital growth and the Secondary locations, which reported 9.0 per cent capital growth.
However, the gross rental value growth for these three subcategories was positive and the net rental value growth was more diverse. The net rental value growth reported in Secondary locations decreased by 1.5 per cent over the year September 2017 to 2018, compared to 3.6 per cent in Super Prime and 3.9 per cent in Prime Regional locations.
When comparing the data by student accommodation type, larger properties with 500+ beds marginally outperformed medium properties with between 250 to 500 beds and small properties with fewer than 250 beds in the year to September 2018, according to the recent CBRE data.
The capital value for large student accommodation properties rose to 7.2 per cent, which resulted in 12.9 per cent in total annual returns. Whereas, the capital growth for medium properties was 6.2 per cent with total annual returns reported for these properties at 11.6 per cent and the capital growth for small properties reported at 5.8 per cent with total annual growth at 12.2 per cent.
As student accommodation capital growth rates gain momentum year on year, these properties are becoming an increasingly recognised area for investors. Jo Winchester, head of student accommodation at CBRE, commented: “This Student Accommodation Index demonstrates the continued strong performance of the sector which has outperformed the CBRE Monthly Index over the last 8 years.
“UK student accommodation is now firmly established as a mainstream investment sector. 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.”
Comments