£800 million was invested in student housing in the first half of 2012, more than double the first half of last year.
Investors pumped £375 million into the thriving sector in the first six months of 2011, according to CBRE, capitalising on high student demand. Many feared that would drop this year thanks to rising UK tuition fees, but exactly the opposite has happened: applications from overseas students have increased, leaving housing supply across the country struggling to keep up.
The same thing is happening is across the continent.
Europe's economy may be struggling, but going back to school is bucking the recession for everyone. As Marcus Roberts at Savills notes, "student housing markets are traditionally counter-cyclical, with student numbers growing in times of economic downturn and weakening labour markets, and this is exactly what is happening in France both in terms of domestic and international students".
Indeed, French student housing has seen demand increase over recent years. With the number of students living with family or parents dropping by 10 per cent in the last decade, more are turning to their own places to rent, pushing up occupancy rates, rents and investment returns. Yields now range, depending on location, from 5.5 per cent to 7 per cent, according to Savills.
But even that pales in comparison to Spain.
The lack of Spanish development amid rising tenant numbers has led to strong imbalance between supply and demand in the student accommodation sector. Spanish universities have seen registrations rise by an annual average of 6.6% since 2008, marking the highest average annual rise in Europe. Occupancy rates were at 100 per cent between October 2011 and June 2012. Meanwhile, stock is set to increase by only 1.3 per cent in the current academic year, just as student registrations are expected to soar by another 10 per cent.
The result is a boom in the middle of Spain's bust, with yields estimated between 6.75 and 7 per cent.
But investors in the UK are still leading the student surge. With reported occupancy rates of 99 per cent or more and a lack of supply in the private rented sector, rents for purpose built accommodation are expected to grow annually in most university cities at least in line with inflation.
Jo Winchester, Head of Student Housing Advisory, CBRE, said: "The current lending market is dominated by large-scale loans against well-managed portfolios, but debt remains restricted for new entrants, single property deals and projects outside of London. Whilst they tend to prefer large transactions, insurance companies are able to fund direct let properties and still meet low risk criteria as their exposure is only based on a conservative percentage of valuation.
"There is no shortage of investor demand, but the market is hampered by a shortage of new high quality development opportunities. Proposed changes to the REIT regime, together with the significant increase in the number of new operators in the last four years could widen opportunities for indirect investors by creating a greater choice of investment funds, as well as creating an alternative exit position for established operators."
Looking to buck the recession? Go back to school
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