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£2.5bn annual investment in student housing ‘to continue’

Written by: Paula John
Investment in the student housing sector has surged in the last two years and the trend looks set to continue.

According to a new report, Spotlight on UK Student Housing, commissioned by Pinnacle MC Global Network , there is currently £5bn worth of standing student housing stock and development sites sold.

It concludes that the market shows no sign of cooling, with 2014 set for “high levels of investment activity”.

The report states:

“In the first four months of the year, there have been transactions worth £950m and this equates to over 17,000 beds. This is above the level seen in the same period of 2013, it is well above previous years including 2012. With a further £1.4bn worth of investments on the market we can expect to see activity in the region of £2.5bn by the year-end.”

The report claims that UK student housing offers a “significant opportunity” for developers, with potential for an extra 290,000 student beds across the UK. The Russell Group of universities plans to spend £9bn between now and March 2017 on the construction of buildings, including student accommodation, and other facilities.

Some feared that increased tuition fees would mean a long-term decline in student numbers, but according to the report UCAS application data for the current 2013/14 academic year showed a 3.6% increase and early returns for 2014/15 show total applications are up 3.4% compared to the same period last year.

Pinnacle MC Global Network believes that by constructing more purpose-built student accommodation to replace houses in multiple occupation (HMOs), another 66,000 homes could be released back to the general housing stock in England and Wales to help ease the housing crisis.

The report’s analysis of student housing stock across the cities of Bristol, Liverpool, Manchester, Newcastle and Edinburgh, highlights that over 50% of the beds in these five cities are in lower quality, out dated halls of residence. Of these, two-thirds are managed by universities, often lacking modern facilities, security and maintenance.

Julie Harvey, director of Pinnacle MC Global Network said:

“This situation offers a significant opportunity for operators in the market. We calculate the majority of lower quality blocks are in good locations and so could be renovated to a higher standard. However, 16% of all beds are in lower quality blocks in poor locations (this ranges from 5% in one city to 30% in another). For operators looking to expand, the opportunity to take market share from these lower quality and poorly located blocks will be attractive.”


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