Investor demand for sound, income-generating assets has doubled the market for student housing over the past 18 months and the sector is now worth over £2 billion a year, according to a report ‘Spotlight on Student Housing’ published by Savills.

“A lack of bank finance and uncertainty regarding university funding has created unprecedented opportunities for investors,” says Yolande Barnes, head of Savills research “Some of these are in high quality university cities which would not otherwise be available to them, due to a lack of newly built supply.

“Student housing is widely considered to be a new or alternative sector, but it has outperformed many commercial property asset classes over the past five years, with average blended annual yields approaching 6%. Its appeal to investors looking to offset riskier assets with a more defensive asset strategy cannot be overstated, particularly against the current economic backdrop.”

At the same time, Barnes says that new investment opportunities are arising as universities seek to avoid calls on capital and revenue arising from their own ageing accommodation and are increasingly looking to generate capital receipts (and upgraded accommodation) from investors through stock transfer.

Concern that changes to the funding of universities would impact on student numbers so far appear unfounded. Total applications for the age groups of 18, 19 and 20 (which account for 75% of all applications) are already well over 90,000 ahead of the number of degree place acceptances in 2011 for the same age group. Longer term, investors should also scrutinise domestic demographic changes. By 2020 the cumulative fall in the 18-20 demographic is projected to fall by 358,000 from its high of 2.48 million in 2010.

International student demand for UK university places is forecast to rise by 30,000 by 2020 provided UK immigration policy allows for this growth, and the distribution of this demand will be key.

Barnes said: “Universities with a track record of attracting high calibre international students will be those catching the eye of investors.”