Recent data on UK student property investment has shown that, while the increase in fees enacted this year has not hampered investor sentiment, it has made investors think more carefully about what and where to invest in.
As with every other sector, this, for a lot of investors leads them to London. However, according to the latest data from Knight Frank, anyone who came to that conclusion in the last 12 months will have seen exceptional returns, while long term investors will have seen their returns from student property in the city double.
According to the firm's Student Property Index for 2011 as a whole, student property investments in London brought returns of 15.1% in 2011, which is almost double the returns of 8.4% seen in 2011. The figures show that this growth was mostly fuelled by a 9.1% growth in average rents, from 13,121 to 14,313 between September 2010 and September 2011. The rest of the return growth was fuelled by a 9.1% growth in capital values.
In fact, the index shows that the roles have been reversed in the last 12 months. According to the data in September 2010 student property investors outside London (in the "regions" as Knight Frank calls it) had seen total returns of 14.6%, while investors in London had seen returns of just 8.4% ("just" in terms of the size of the comparison, not because 8.4% is low). But by September of 2011 investors in the regions had seen returns fall to 10.1%, while returns in London had grown to the 15.1%.
The fall in returns outside London is surprising, because according to the data rents in the regions grew by the same 4%, while capital values also grew by 4%.
Explaining the figures, James Pullan, head of student property for the firm said:
"There is a large structural undersupply of student accommodation in the UK, with the largest gap in London. There is still strong and as yet unmet demand for properties offered to students for rents of less than £200 a week, offering investors a good opportunity in the coming years."
- Wednesday 25 January 2012