Yields from United Kingdom student accommodation investments will remain stable during 2014 and rise, and returns will continue to outperform other sectors according to a new research report.
Southeast Asia has seen a substantial increase in the number of student investment opportunities being marketed at exhibitions during 2013, and the number of student accommodation developers looking to tap the current thirst for overseas property investments looks set to continue next year.
Knight Frank’s 2014 Student Property Insight report has estimated that direct let yields in London will be around 5.75 percent next year, with rental growth at three percent. Elsewhere in the U.K. yields are predicted to be 2.75 percent during the 2014/15 academic year.
Although U.K. student accommodation yields have dropped substantially over the last three years in line with other sectors, total returns from student accommodation outperformed other property investment in the year ending September 2013, reaching 7.8 percent. Investments in the industrial and office sectors recorded around 7.5 percent, all property at 5.2 percent and retail at just over three percent, the agency noted.
“Student property returns will continue to outstrip traditional asset classes with yield compression into 2014,” the report concluded, adding that the student property sector remains undersupplied and the imbalance will not quickly be corrected.
London, Edinburgh, Newcastle and Bristol – as well as Cardiff and Liverpool – all had strong rental growth of between three and four percent thanks to high-performing universities and an acute undersupply of accommodation. Preston, Leeds and Birmingham have seen one-off rental reductions as operators have taken a more risk adverse approach to ensure they achieve full occupancy, according to Knight Frank.
“We would comment that instances of rental reductions are relatively unusual in the sector, and that the striking feature of the commencement of September 2013 academic year was that all core markets were fully let.”
Full report: http://www.knightfrank.co.uk/resources/residential/insights/knight-frank-student-property-insights_web.pdf
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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