Buy-to-let student flats 'are way to beat the recession'

STUDENT accommodation will provide good returns as a buy-to-let investment even during the recession, it was claimed today.

An increase in the number of students means housing for them is now more profitable for landlords than residential lets, estate agent Knight Frank said.

London has more students than any other city in Europe, with 260,000 studying full-time.

Experts say at least another 100,000 purpose-built student bedrooms are needed to meet demand, particularly from the growing number arriving from overseas. The collapse in the value of the pound has made London more attractive as a centre of study.

Developer Unite, which specialises in building student halls, has announced rents on its studios and en-suite rooms across London will rise by up to 25 per cent next academic year.

In 2009/10 a studio room in the capital will cost between £240 and £348 a week, while an en-suite room will cost between £170 and £196 a week.

Another developer, Infrastructure Investment, was granted planning permission last month by Islington council for student halls on the corner of Goswell Road and Wakley Street.

The 136 studio rooms, for students at nearby City University, should be ready in 2010. They will range from 14.7sqm to 24.9sqm and feature flat-screen televisions. The halls will have a 24-hour concierge and free bicycles.

Increasing numbers of students, particularly foreign students, opt for purpose-built accommodation, which offers higher standards than traditional student flats or houses. The credit crunch has cut construction costs and site prices. The combination means student housing is providing better returns than residential property.

Undergraduate developments have seen an average annual return of 12.2 per cent in the past three years, compared with 9.7 per cent for buy-to-let residential property, according to Knight Frank's figures.

A spokesman for Knight Frank said: "The education sector has historically been more resilient to the general economic cycle than mainstream property sectors. It is relatively low risk." But students' groups today warned there was a lack of affordable homes for people studying in London and that private rented accommodation was not helping.

The National Union of Students' vice-president for welfare, Ama Uzowuru, said: "We are concerned at the lack of affordable, good quality housing for students in London. Although some new student housing is being built, the private contractors often set the rent level at the higher end of the market, meaning many students are effectively priced out."