The UK has witnessed a surge in student housing investment activity over the past few years and this September a record 2.3m+ students are expected to be in the higher education system, adding further pressure on universities for places and the towns for suitable student accommodation.
Investors have traditionally turned to unlisted student accommodation funds such as Brandeaux and Mansion Group – both of which own quality institutional grade stock with the real estate itself generating good returns – but seemingly it is not all filtering back to the investors. Worse still, certain fund structures have effectively been ‘locking in’ investors, prohibiting them redeeming their capital. Even the listed sector is still not able to provide dividends in line with returns expected on the tax efficient REIT structure.
The sector as a whole has been generating over 7% per annum (Knight Frank 2014), so why can’t investors enjoy this? Real estate performs well but the investment structures seemingly have onerous drag and liquidity issues. Income is the key in property investment and student accommodation is lauded by professionals for its high income generation and stable rental growth. So what else is there?