The strength of the Purpose-Built Student Accommodation (PBSA) market is not a big secret. Buy to let property investors from around the world have long been enamoured by the high rental returns on offer in the sector.
However that is not to say that it is oversaturated or that demand is falling. On the contrary, recent growth and projections for the future show that there is still significant value available in the market. 2018 was a good year for people investing in PBSA, and all indications show that 2019 may well be even better.
It is estimated by Knight Frank that the total value of PBSA transactions in 2018 was as high as £4.5bn, an increase of more than 10% over the figure for 2017 and on the way back to the pre-Brexit referendum high of £5.1bn. A report from Cushman & Wakefield confirms the scale of the sector, stating that there are now more than 600,000 beds available for students.
Furthermore, Knight Frank predicts that the sector as a whole will be worth £50bn by the end of 2019, making PBSA a significant part of the overall UK buy to let market.
It is interesting to note that the PBSA sector is growing in popularity amongst all levels of investor. At one end you have individual investors adding student apartments to their portfolios in order to diversify; at the other you have large acquisitions by companies such as Brookfield, CPPIB, Unite, GCP Capital, Europa & Generation Estates and Tristan Capital.
Altogether it is clear that the market continues to be seriously appealing. A report from Taylor Wessing highlights some of the main reasons this might be, including the lack of available supply for students, the sector’s proven stability and resistance to economic downturns, the relatively low risk of tenants defaulting or void periods when compared to residential investments, and the top class education provided by British higher education institutions.
With Brexit yet to be finalised, markets such as PBSA should be cherished by investors. The stability on offer is likely to provide good returns for the foreseeable future and add a little more certainty to any buy to let property portfolio. With UCAS, the organisation which operates admissions to UK universities, reporting that a record proportion of 18 year olds applied for higher education spots in the 2018-19 school year it is clear that the future of the PBSA market is bright.
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