Student housing capital values rise

Capital values for student accommodation assets in the UK have risen by 6.5% year-on-year to September, according to new data. CBRE’s new Student Accommodation Index shows the increase is up from the 4.5% growth recorded in the previous year. Rents rose by 3% on a gross basis and by 3.4% on a net basis respectively. At the national level, annual total returns were 12.3% for the year to September. Annual total returns in central London outperformed regional areas. Driven by capital value growth of 12.4%, annual total returns for student housing in the central London reached 17.5% for the year to September. Annual total returns in the regional student accommodation market totalled 10.5% during the same period, with capital growth of 4.5%. Outside of central London, accommodation in super-prime towns reported capital growth of 11.1%; above those in prime regional, up by 6%, and secondary locations, which declined by 9%. While gross rental value growth was positive in all three categories, net rental value growth showed more divergence. Net rental value growth in super-prime and prime regional towns in the 12 months to September was 3.6% and 3.9% respectively. In secondary locations, net rental value decreased by 1.5%. Large properties with upwards of 500 bedrooms slightly outperformed small (fewer than 250 bedrooms) and medium (250-500 bedrooms) properties during the 12 months. Capital values for large assets rose by  7.2%, resulting in total returns of 12.9%. Meanwhile, capital growth in small (5.8%) and medium (6.2%) student properties resulted in total returns of 11.6% and 12.2% respectively. Jo Winchester, executive director of student accommodation valuation and advisory services at CBRE UK, said: “This first published Student Accommodation Index demonstrates the continued strong performance of the sector which has outperformed the CBRE Monthly Index over the past eight years. “UK student accommodation is now firmly established as a mainstream investment sector. Investors will find the increasingly sophisticated raft of influences on performance highlighted by this index, including location, asset scale, university rankings, applications, and distance to university very informative.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette