Investors piling into student housing and soaring university admissions helped one of the sector’s biggest property firms Unite Group deliver a leap in net asset value (NAV) and profits last year.
The FTSE 250 company, which owns 46,000 beds across the UK valued at £3.8bn, said EPRA earnings, the industry benchmark, leapt by 84 per cent to £61.3m in 2015 from £33.3m the previous year.
Earnings per share increased by 66 per cent to 28.6p while its NAV per share rose by 33 per cent to 579p. The group has also hiked its full-year dividend by 34 per cent on the back of the strong results to 15p.
Like-for-like rents increased by 3.8 per cent for the 2015/16 academic year and Unite's portfolio is 99 per cent occupied.
A record 532,000 students were awarded university places in September last year after a cap on the number of applicants universities can admit was lifted by the government. Around 440,000 students graduated, meaning that total student numbers were some 92,000 higher than the previous year.
Chief executive Mark Allen that going forward, the company expects the student population to grow by around 60,000 a year, fuelling demand for more student housing.
“The demand supply imbalance is getting worse... from what we can see being built in the pipeline, we think it is unlikely for more than 30,000 rooms will be built a year,” he told City A.M.
Increasing demand for student housing has also caused interest into the sector from outside investors to surge. He estimates that around £5.5bn over new capital was invested into student property last year, which is equivalent to more than a quarter of the sector’s overall value.
"There used to be more scepticism towards the sector whereas now it has become mainstream," Allan said.
“Around 85 per cent is now owned by long term investors such as institutions or owner operator rather than developers. So I expect we will see a reduction of transactions going forward as they look forward to grow their portfolios rather sell assets,” he added.
Separate figures released today by construction data firm Barbour ABI showed building activity in the sector reached a five year high in 2015, with contracts for more than 4,500 new rooms granted – up 26 per cent on 2014.
The total value of construction projects for student housing was worth over £2.3bn in 2015, with investment in the sector showing no sign of slowing down, the firm said.
Unite's development portfolio increased to 6,800 beds valued at £230m last year. It has planning consent in place or in progress for 2,300 beds in 2017 and a pipeline of 1,400 beds so far for 2018.