Demand for student housing continues to outstrip supply, according to King Sturge…

The UK’s student accommodation sector is no longer a niche property market and is now recognised as an asset class in its own right by financial institutions and investors, according to a new report.

The latest student accommodation report from international property consultants King Sturge says there were over £700 million of transactions in the sector last year.

The firm handled almost all of these, the most significant of which was the disposal of the Moorfield student portfolio, involving the £190 million sale of around 4,000 bed spaces in several UK cities.

£20 billion market

And with the numbers of students continuing to rise – there were more than 1.43 million in full-time higher education in 2007, an increase of almost 6 per cent on the previous year – demand continues to outstrip supply, with an ongoing shortage of quality student accommodation in city centres.

As rental growth continues and the total value of the UK’s 450,000 purpose-built beds passes the £20 billion mark, the report says investors have come to view the sector as being relatively secure and stable amid the current economic uncertainty.

“This year we have recorded a strong increase in the number of privately developed, purpose-built beds, up by 36 per cent since 2005 to more than 123,500,” says Philip Hillman, the national head of King Sturge’s UK student accommodation group.

“It is clear that the sector is entering a new phase of university-led development and refurbishment of existing stock, alongside an increased focus on the provision of premium accommodation for overseas students in major European university centres.

And while significant opportunities still exist in London, with its supply-demand imbalance, this may be somewhat tempered by an increasingly restrictive planning regime.”

A growing trend

Philip Hillman continues: “Despite the general uncertain economic outlook, more students are choosing to participate in higher education – a trend that shows no sign of slowing.

“After a period of extraordinary growth in the development by the private sector of direct-let student accommodation, the prime focus now for the private sector is for direct-let schemes in the capital.

“There will, however, continue to be large-scale developments in provincial university cities, where there is still an imbalance in the supply of good quality purpose-built accommodation.”