Investment in UK purpose-built student accommodation (PBSA) soared five-fold in Q1 year on year to nearly £750m, according to Knight Frank’s latest UK Student Housing Market Update.
This was five times the £148m of deals recorded in Q1 2023, but down on the bumper starts to the year recorded in 2021 and 2022.
Knight Frank said the transactional evidence suggests PBSA yields have proven notably more resilient than many other traditional real estate sectors, shifting by only approximately 50-75 basis points from peak pricing.
Merelina Sykes, joint head of student property at Knight Frank said: “The UK student accommodation sector demonstrated its resilience in the first quarter, attracting significant investment despite the broader economic headwinds. While total deal volumes are down compared to recent years’ peaks, the sector’s strong performance reflects investors’ confidence in its long-term prospects.”
Katie O’Neill, head of student property research at Knight Frank, added: “With money markets betting on two interest rate cuts in 2024, any improvements on the debt environment will boost transactional activity, but the focal point this year for the PBSA market will be on politics and policy. Heightened by the lead up to a general election, Q1 saw restrictions to the student visa route come into effect.
“However, it is important that policymakers do not to conflate student visas with actual student numbers, with many students securing visas for multiple countries. Without a greater understanding of this and the economic benefits international students bring, there is a real risk of an over-correction, which ultimately has knock on effects for the financial health of the UK’s higher education sector.”
