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TODAY'S OTHER NEWS

Major shift in student accommodation sector as PBSA soars to ‘frothy heights’

The UK Purpose-Built Student Accommodation Sector (PBSA) has grown by a record 5.3% in 2019 which equates to more than 34,000 new beds coming to the UK market, according to StuRents.

The student property platform, which operates one of the largest student-centric accommodation search platforms, listing more than 750,000 bed spaces nationwide, which it estimates is about 80% market share, has analysed its own data to unveil the data. 

The findings show that Houses in Multiple Occupation (HMOs) still dominate the student accommodation sector – equating to at least 56.1% of all beds – with average advertised rents increasing by 6% to £97 per person per week (pppw) in 2019. In the PBSA sector, rents increased by 1.9% to £169pppw.     

With a considerable supply pipeline of 120,000 beds either approved or awaiting approval,  StuRents forecasts that by the end of 2020, the number of PBSA beds will surpass university-supplied accommodation for the first time to date.

But this has also raised concerns about the oversupply of PBSA in certain local markets such as Plymouth, Newcastle-upon-Tyne and Cardiff. 

However, some locations are witnessing a dramatic fall in planning applications as investors seek the next development opportunity.

Richard Ward, Head of Research at StuRents, said: “The student accommodation market is shifting and there is no doubt that the Purpose-Built Student Accommodation sector is soaring to frothy heights. 

“With record growth in the past 12 months, the current pipeline is set to break records, outstripping university supplied accommodation for the first time. In the short term, some locations may suffer from oversupply, however, this is likely to change as the 18-year old demographic recovers from a recent dip.

“The expanding UK PBSA sector, which to date has centred on the largest student cities, has the potential of altering the market further, challenging HMOs’ dominance over smaller cities and university towns. With regional differences becoming starker and some markets beginning to mature, affordability and operational efficiency are the new battleground.”

While 2019 is a watershed moment for the student accommodation sector delivering one of highest levels of transaction volumes, investor appetite has not been consistent, according to Anthony Hart, partner, Residential Investment & Student Housing at Allsop. 

Hart commented: “While 2019 is a watershed moment for the student accommodation sector delivering one of highest levels of transaction volumes, investor appetite has not been consistent. Changing market fundamentals means that a single broad investment strategy cannot be replicated in different UK locations.

“As students both domestically and internationally are investing more and more in their education, investors’ interests are still being piqued by the very best locations at renowned institutions, which doesn’t only include Russell Group universities.

“Opportunities still remain; regional centres continue to perform well and the appetite in London remains relentless due to burgeoning demand created by a lack of beds and stringent planning conditions.”

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    Purpose built student accommodation, a good idea for students, but would I invest ? that's a big fat NO to that one.

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    I heard a radio programme recently saying this was the "next timeshare" and an investor rip off waiting to unfold due to the poor construction standards, potentially high ongoing maintenance costs and possible short life span of many of these developments. The investment expert warned private investors to stay clear and invest in traditional flats in University cities with a proven track record of student demand and a simple exit mechanism through resale to new buyers. Another programme suggested these buildings could still have Grenfell type cladding fitted quite legally as they are not classed as permanent dwellings.

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