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Student rents rise by 10%

Student rents rise by 10%

As the new academic year gets in full swing, the crisis in student housing has been laid bare by new research highlighting that, in some areas, there are as many as five students for every available room. Demand is so high that rents have been pushed up by 10% meaning that students need to find more money from their loans and bursaries just to find accommodation of any quality.

Demand for student rooms in some cities is so high that competitive rent pricing will leave students £600 poorer each year, with almost a third of rooms for rent in top university towns currently unavailable to students. In Oxford, students will need to find an extra £50 each month for accommodation, while parts of London and Edinburgh are experiencing five students in competition for each room available. Students in Dundee and Durham have the best chances of finding student-friendly housing, with 93 per cent and 92 per cent of rooms in the respective areas available to for students.

The problem is of particular concern in the South of the country and in popular university towns, especially London, where the presence of several big universities means competition for housing is fierce. In London average rents for the London School of Economics highlighted the issue perfectly when average rents hit £1034 per month with an average of 5.2 students to each available room.

In Manchester and Nottingham the issue is much less prominent as average rents per month hovered around £400 with 3.7 and 1.8 students per available room.

Private investment and construction of student housing has exploded in recent times as universities struggle to provide acceptable accommodation for students. Student numbers themselves have increased since the lifting of student number caps by David Cameron’s government.

Student accommodation is now heavily reliant on inward investment from the private sector and this is gratefully received from investors who are seeing high tenancy rates, good capital gains, and strong yields. As the investment opportunities join the mainstream the only problem with the changes so far is that they aren’t going nearly far enough.

It is difficult to see any sort of scenario in the next five to ten years where supply will outstrip demand with numbers like those published. Student numbers will continue to rise and private residential landlords are reportedly reluctant to consider student tenancies which are allowing only one viable solution – Purpose Built Student Accommodation (PBSA).

The statistics identify the issue of supply and demand as a key cause of increasing rent. Rental costs fell by 1 per cent in Durham, where the percentage of rooms available to students is one of the highest at 92 per cent, while the ratio of house-hunting students to rooms available is among the lowest, at 0.91. By contrast, in Oxford, which has seen the highest increase on last year with a mean rise in rents of 10 per cent, only 64 per cent of rooms are available to students, of whom there are 3.2 for every available room.

The solution needed is one which balances supply across the country. That solution won’t be found by universities seeking to resolve their own supply issues, but rather by inviting keen private investors into the market to provide high quality PBSA at a reasonable cost. As demand for student accommodation rises, so too does the desire for value for money and this ensures that the most popular rooms for rent will be those with top class facilities such as gyms and high speed broadband. These facilities are too often overlooked by university owned premises.

The solution won’t be found overnight, but as long as there is demand there will be investors seeking high value from a very strong and competitive market.