Is Now the Time to Invest in UK Purpose Built Student Accommodation?

Investment in UK Purpose Built Student Accommodation was up 69% in 2022, yet demand continues to outweigh supply due to a rapidly growing student population.

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Knight Frank’s Student Property Report 2023 has revealed that investment in Purpose Built Student Accommodation totalled £7.2 billion in 2022, up 69% year-on-year. More investment was seen in Q4 than in the whole first nine months of the year, largely due to a £3.3 billion sale that was closed in the final quarter.

A growing UK student population

The leap in PBSA investment is a response to the “accommodation crisis” that has hit UK universities in recent years. Many applicants deferred their studies during the pandemic, leading to a backlog of prospective students. This, coupled with an already growing student population, has led to an insatiable demand for suitable accommodation in the UK’s major cities.

Acceptances have increased by 14% over the last decade. ONS Population estimates that the number of full-time undergraduate students will grow 16% by 2030, with an additional 250,000 students entering the rental pool.

The UK is also experiencing an influx of international students. A record-breaking 1 in 10 of all placed applicants are from outside the EU—and these students are considerably more likely to rent PBSA.

Where is the demand?

The demand for student accommodation is being felt across the UK. According to Knight Frank’s Student Property Index, headline rental growth for purpose-built student accommodation increased by 2.6% for the 2021/22 academic year and is expected to exceed 5% in 2023.

In both Bristol and Manchester, students have outweighed the number of student beds by 3:1 over the last five years. Manchester Metropolitan, in particular, was in the spotlight at the beginning of the 2022/23 academic year for offering first-year students compensation to live in neighbouring cities such as Liverpool and Huddersfield. It is no surprise, then, that Manchester and Bristol are outperforming their peers in terms of rental growth.

PBSA rental growth & the wider market

With double-digit price growth across the wider rental market, some could argue that PBSA is a less attractive option. However, the rise in UK rents has narrowed the price gap between regular accommodation and PBSA.

PBSA rents are often inclusive of WiFi and utility charges and grant access to a range of facilities such as a gym and parking. Because of this, and in light of the cost-of-living crisis, the price of PBSA is becoming much more reasonable and, in many cases, the more affordable option for students.

In fact, students living in PBSA in London pay 33% less a week than those renting regular homes when factoring in the cost of bills. Therefore, PBSA saves students in the capital £108 per week or £5,527 over a 51-week tenancy.

Nearly 100,000 student beds are either under construction or in the planning pipeline. But despite this, supply is set to remain limited. The demand for student population will continue to greatly outweigh accommodation in the years to come, making PBSA in the UK’s major cities an attractive investment opportunity.

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