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Student homes continue delivering healthy returns

This is according to the first Knight Frank Student Accommodation Index set up to accurately track the performance of this important asset class.

Investment returns across England & Wales fell back from 6.56% in September 2009 to 6.25% in September 2010 whilst Current investment yields stand at 6.00% in London and 6.5% in the regions and Total returns (income and capital value growth) stood at 13.5% in England & Wales in September.

James Pullan, Knight Frank’s head of student property commented: "Student property has delivered consistently healthy returns over the past five years. The sector avoided the crash in both capital values and rentals seen in the wider commercial and residential sectors in 2008 and  early 2009.
"Across England & Wales rents have continued to rise into the 2010/11 academic year (by 2.2% on average) reflecting the strong demand for accommodation from a rising student population, but also the ongoing process of improvement and enhancement being undertaken by the student accommodation operators.“
"Investors are looking increasingly favourably on the sector as they are attracted by what are perceived to be the contra cyclical properties of investing in Education. Specifically investors are seeking security of income and the wider investment case offered by student property and this is demonstrated by the sharpening of yields over the past 12 months by over 30 basis points – from 6.56% to 6.25% in the 12 months between September 2009 to September 2010.
"Full occupancy is a characteristic of the sector.  In the regions outside London rents have risen by around 4.1% over the last academic year. In London we have observed some pressure on the high end stock which has resulted in an overall fall of rents this year.
“The general outlook for rents is of continued pressure for annual growth with undersupply of student accommodation still a pronounced feature in most markets.   In London we project a stabilisation of rents over the forthcoming year with developers targeting strategically accessible transport hubs to provide high quality accommodation at sustainable rents.”

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