Student housing investment soars 145%

Property investors are still piling cash in student housing – totalling a record £2 billion in corporate investments in the first nine months of the year.

Money going in to student accommodation is 145% more than the same period 12 months ago.

Investors are also shifting their focus away from London to other major university cities, says the latest market survey by property consultants CBRE, as more than £1 billion has gone outside the capital.

The deals are also bigger – during the past 15 months, the market has seen five transactions of more than £100 million, while before September 2011, no single deal exceeded £85 million.

The University Partnerships Programme (UPP) Regional Portfolio typifies this – Dutch pension fund manager PGGM invested in a 60% stake in UPP’s assets this year, worth an estimated total of £840 million.

Jo Winchester, Head of Student Advisory, CBRE, said: “Total returns remains a key driver for investors, as they flock towards the impressive returns given by student accommodation for a second year in a row.

“Our data shows that student accommodation is outperforming other asset classes by some margin, as it has brought 9.6% returns in the year to September 2012. This compares to 5.4% for all offices and 2.2% for all retail in the year to August 2012.

“The market is dominated 90% to 10% by investment deals, as the development market continues to suffer from funding constraints.”

The increase in university fees has made a difference to the number of students attending university in 2012/13, notes Winchester.

Research also indicates that a low number of students deferring from last year; a lower than expected number of  students with AAB grades; and changing demographics have all contributed to a decline in student numbers, yet investors remain undeterred about parting with their cash.

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