Knight Frank says rental growth in the Purpose-Built Student Accommodation sector (PBSA) slowed to 1.5% in the 2026/27 academic year.

The agency says this slowing was in response to  affordability pressures and increased competition reshaped leasing conditions across the UK PBSA market. 

According to the firm’s annual UK Student Accommodation Outlook, market performance is becoming increasingly polarised. University-owned accommodation recorded rental growth of 4.3% over the year, while private direct-let PBSA rents fell by 0.7%, marking  the second consecutive year in which university-owned stock has outperformed the private sector. 

At the same time, rental incentives accounted for 4.7% of advertised annual rent in schemes with availability in September, up from 4.2% a year earlier and reflecting greater competition for occupiers and a more price-conscious student population. 

Despite a softer operational environment, Knight Frank found that approximately £2.7 billion approximately has been invested into UK PBSA in 2026, while an estimated £1.5 billion of assets are currently under offer, led by interest from North American investors.

A spokesperson says: “Performance is becoming increasingly nuanced. Rental growth is no longer being delivered uniformly across the market, with affordability pressures, changing student priorities and growing competition placing greater emphasis on factors such as asset quality, location and operational strategy.” 

The findings come as the number of study visa applications processed in the year to September fell to 303,200, down 20% year-on-year, reflecting ongoing policy uncertainty and recruitment pressures across higher education institutions.  

The report highlights affordability as a key factor in students’ accommodation decisions. Findings from the firm’s latest Student Accommodation Survey, conducted by UCAS on behalf of Knight Frank, show that nearly nine in ten respondents (89%) consider accommodation costs important when choosing where to live. 

Meanwhile, 74% of students said they would be more likely to remain in PBSA beyond their first year if it were more affordable.  

The survey also found that 84% said accommodation availability had influenced where they chose to apply, underlining the growing importance of housing supply as universities compete to attract and retain students. 

The survey also highlights the growing importance of housing to student outcomes. Nine in ten students believe their accommodation environment affects academic performance, while 88% say accommodation plays an important role in supporting their wellbeing. 

Meanwhile, a third of students reported they are likely to use AI tools to help source accommodation and track pricing, signaling a growing shift in how students search for housing.