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Global Research - 

Expert Insight

Student property has performed exceptionally well as an asset class compared to traditional investments over the last year. In fact, it has outperformed every other commercial property class and delivered consistent returns throughout the economic downturn, argues Knight Frank’s Head of Student Property James Pullan.

Student property has performed exceptionally well as an asset class compared to traditional investments over the last year. In fact, it has outperformed every other commercial property class and delivered consistent returns throughout the economic downturn, argues Knight Frank’s Head of Student Property James Pullan.

The investment map below identifies the key locations for sector investment. We have ranked the top 20 cities we believe to have the best opportunities for student investment in 2012 based on supply-side factors as well as the quality of the university. The most attractive areas, almost by definition, have the most limited development pipeline.

Limited supply coupled with rising global interest in the UK’s educational excellence points towards further strong rental growth in the sector. The Knight Frank Student Property Index highlights how the student sector compares favourably with other sectors, as we explain on page 3 opposite.

The customer base for purpose-built student accommodation in the UK includes a very high proportion of overseas students. We foresee this demand continuing to grow as global student mobility increases further still. As shown on pages 4-5, there has been a very clear trend in the growth of students travelling abroad to study over the last decade and it is expected that the number of students leaving their own country to study at university will double again by 2025.

Overseas students have a high tendency to choose purpose-built accommodation in the UK, for a variety of reasons, including security, location and facilities. Specialist providers of accommodation are certainly in a position to help support the requirements of these students.

As students demonstrate growing global mobility, lenders are increasingly international and funders are showing a rising tendency for cross-continent investment. This backdrop provides specialist UK operators with a global opportunity to export their expertise to the immature markets overseas.

The UK higher education sector is certainly facing challenges this year. The funding changes in respect of university tuition fees are dramatic. But the impact of the changes will be similar to a graduate tax, as students will not be required to pay back loans for tuition fees until they earn more than £21,000 a year.

The regional differences in the tuition fees, as examined on pages 6-7, may well distort the market with a knock-on impact on Scottish universities.

The winners from the new tuition fees regime will be the most prestigious universities amid a “flight to quality” as students search for the very best course available for their fees. The losers will be the least prestigious institutions offering commercially unattractive degrees.

Overseas students will remain largely unaffected despite this turbulence in the UK higher education sector because they already pay tuition fees.

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