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Rental growth in UK student property market to continue, says Knight Frank

KUALA LUMPUR: Rental growth in the UK student property market is expected to continue, underpinned by limited supply and strong demand, according to a statement released by Knight Frank UK.

The international property consultant anticipated further rental growth in the sector due to an increasing student population, restricted new accommodation supplies and the lack of accessibility to privately-managed boarding, it said in its UK Student Property Review 2010.

An influx of foreign students and postgraduates are driving growth in the sector, due to their preference for professionally-managed accommodations and their lower price sensitivity compared with other student segments, it said.

The anticipated growth in the student property sector is in tandem with higher education growth; the latter has an annual growth rate of 2.5% per annum while the student property market has seen an average 5% per annum growth in rentals over the last six years, it added.

Greater returns are predicted especially in well-located en suite cluster schemes in London and top university cities, with the latter reporting nearly-full occupancy rates in the halls.

“Regional rental growth from the academic year 2008/2009 to the academic year 2009/2010 period showed rises of as much as 13% in student rents in Bristol, Leeds and Liverpool, 12% rises in Nottingham, 11% in Cardiff and Leicester, 10% in Edinburgh and London, Birmingham and 9% in Manchester and 7% in Newcastle,” it said.

Furthermore, equity rich investors may capitalise on this undersupplied market as the significantly-reduced land values since the market’s apex makes available sites previously considered too expensive for student housing while banks are willing to lend from 60% to 65% on student projects, it said.

“Overall, other commercial sector investment yields have seen substantial compression in the last few months but the prime London student accommodation market has only witnessed the start of this compression for direct lets in the last two months, which should in turn see capital values rise,” it said

In addition, Knight Frank said the compression occurred due to a shortage of stock together with a relative increase in capital chasing such property, and the investment market is following this trend.

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