Student accommodation is becoming hot property as more and more developers are looking to invest in the sector…

The Higher Education Statistics Agency reported that in 2007/08 the number of students living in private halls was at 3.4 per cent but that figure rose to 6.5 per cent in 2012/13.

The statistics show that the private-sector halls market in 2012/13 stood at 102,255 and in March the Mistoria Group found that demand for student HMO properties in the North West had increased by 40 per cent. 

The Mistoria Group also said that by March this year 75 per cent of properties had already been let for September 2015. 

This coupled with more and more conversions of buildings into student flats, including speculation around the controversial music venue refurb reported in DFT last month, led us to ask why are we seeing such a rise and is it an area which sees high yield?

Head of Communications at Omni Capital, Bob Sturges, said it was an area which saw increase in demand for funding over the past six months.

"Whist not entirely in our lending 'sweet spot', we're happy to assess each deal on its merits and we shy away from anything too downmarket as poor quality property - of which there's plenty in this part of the market - has limited resale appeal,” said Bob.

“But there are many plums to be picked, and the returns can be excellent."

Relationship Director at Titlestone Property Finance, Mark Quigley, echoed Bob’s comments who saw the yields as more attractive to investors.

“From the perspective of investors, the yields are attractive when compared to the more mainstream asset classes and given the amount of stock which has changed hands in the past year or two the appetite for good quality assets continues unabated,” said Mark. 

“At Titlestone Property Finance we support a number of student accommodation developers by offering stretched senior debt (of up to 70 per cent of investment value) at fixed interest rates and with a simple front-end fee and back-end fee structure.

“We see the sector as having been incredibly resilient during the credit crunch years with further growth forecast in the years ahead.”

Both believe the rise in students attending university was the reason for the rise in private halls accommodation. 

“It's being driven by a seemingly insatiable desire to study in the capital that's coming both from home and abroad. Favoured areas include the 'Zones 2/3' parts of west London, such as Ealing and Acton,” said Bob.

Mark concluded: “Having been funding student accommodation developments for the past 15 years, I have seen a general rise in applications to universities and the number of students attending and consequently there is a greater need than ever before for purpose built student accommodation.