Lucy Waters is managing director of specialist finance dealer Aria Finance
In a property market dogged by uncertainty, one asset class continues to defy the gloom: purpose-built pupil lodging (PBSA).
At the same time as different components of the market battle with excessive finance prices and decreased investor urge for food, demand for PBSA stays remarkably robust.
It’s not arduous to see why.
With a reliable tenant base, structural undersupply and a confirmed capacity to generate engaging returns, PBSA has all of the hallmarks of a long-term, all-weather funding.
In line with property agent Knight Frank, buyers pumped £3.9bn [1] into UK PBSA in 2024.
Whereas that’s down from the record-breaking £7.2bn [2] seen in 2022 – when rates of interest have been a lot decrease – final 12 months’s determine was 14% uplift on the £3.4bn [3] reported in 2023.
What’s extra, in 2023, Knight Frank predicted that the PBSA market can be value an astonishing £104bn [4] by 2028, up from £85.8bn in 2023.
In brief, even in a tougher financial setting, PBSA continues to draw institutional, personal and worldwide capital.
Strong fundamentals
The enduring attraction of PBSA lies in its fundamentals. The identical Knight Frank information reveals that returns delivered by PBSA have vastly outperformed retail and workplace house over the previous decade.
Demand for lodging persistently outpaces provide, and the continuing shift in direction of high-quality, professionally managed housing means PBSA is more and more seen because the gold commonplace in pupil dwelling. For a rising variety of college students – particularly these from abroad [5] – it’s the popular possibility.
Regardless of rising prices and tighter regulation, occupancy ranges stay excessive – 96%[6] final 12 months, in keeping with pupil lodging analysis agency Bonard – which means buyers get pleasure from predictable demand.
On high of that, rents in key college cities grew at double-digit charges [7] final 12 months – one other key attraction to potential buyers.
There are headwinds – however they’re manageable
That’s to not say the market is with out its challenges. Growth prices stay excessive, with building supplies, labour and borrowing all dearer than they have been pre-pandemic[8] – and even simply a few years in the past, for that matter. This implies buyers are having to be extra selective about the place they make investments.
There’s additionally a rising regulatory burden. The Constructing Security Act has pressured builders to rethink how they design, construct and function PBSA[9] . Gateway 2, launched underneath the Constructing Security Act, requires builders of higher-risk buildings like taller PBSA schemes to acquire full design approval from the Constructing Security Regulator earlier than building can start [PT10] – including time, value, and complexity to initiatives, and probably delaying supply until deliberate for early.
Affordability pressures are additionally changing into extra acute, particularly in regional cities the place hire development could also be bumping up in opposition to pupil budgets[PT11] . And whereas worldwide pupil numbers have remained strong[PT12] , Authorities strikes to tighten visa guidelines [PT13] have launched a level of uncertainty over future development.
But for well-managed inventory in prime areas, the outlook stays strong. Occupancy stays at or close to capability in lots of schemes, and investor sentiment – whereas extra selective – remains to be optimistic.
A structurally supported long-term outlook
Regardless of the near-term pressures, the long-term image for PBSA stays extremely engaging. There are three core causes for this.
Firstly, whereas total pupil numbers dipped by 1% in 2024 [PT14] – largely attributable to modifications in visa coverage – the scholar inhabitants remains to be a lot larger than pre-COVID ranges. Worldwide and postgraduate college students, who’re extra seemingly to decide on PBSA, proceed to kind a rising share of complete demand.
Secondly, universities have restricted capacity to broaden their very own lodging, which means the personal sector will proceed to play a important position in housing college students. In lots of instances, PBSA is not an non-compulsory luxurious – it’s a core a part of the upper training infrastructure.
Lastly, right this moment’s college students and their mother and father anticipate extra. From high-speed broadband and safe entry programs to devoted research areas and wellbeing help, PBSA delivers a way of life that conventional HMOs typically can not match. That offers it a aggressive edge and helps long-term rental development.
Accessing finance: challenges and alternatives
If there’s one space the place PBSA buyers and builders are feeling the squeeze most acutely, it’s finance.
Financing a PBSA deal is way from simple. It requires deep data of the lending panorama, clear positioning of the scheme and the flexibility to match operational efficiency metrics – comparable to occupancy ranges, rental uplift, and tenancy combine – with lenders’ urge for food for danger.
That’s why you want dealer – one which received’t simply discover you a lender however may also enable you form your funding technique.
That’s significantly essential within the present setting, the place many banks stay cautious and solely a handful of lenders are keen to again the sector confidently. For the precise property and with the precise strategy, offers can nonetheless be finished – however experience issues greater than ever.
Resilience and reward
In a market the place many asset courses are underneath stress, PBSA has confirmed itself to be some of the resilient performers. Its earnings profile is powerful, its void danger is low and its tenant base – whereas transient – renews annually in predictable, excessive volumes.
Whereas headwinds stay, they aren’t distinctive to PBSA. What units this sector aside is its capacity to ship long-term rental development and comparatively steady yields, even in unsure occasions.
For buyers, that makes it a compelling alternative. However success is dependent upon understanding the nuances and on having the precise companions in place.
Supply:
https://www.knightfrank.com/analysis/article/2025-02-12-pbsa-investment-hits-ps39bn
Supply:
https://content material.knightfrank.com/analysis/169/paperwork/en/uk-student-housing-2023-9846.pdf
Supply:
https://www.knightfrank.co.uk/analysis/article/2025/2/pbsa-investment-hits-ps39bn
Supply:
https://pbsanews.co.uk/2023/11/21/value-of-pbsa-sector-to-grow-to-104bn-by-2028-knight-frank-finds/#:~:textual content=Analysispercent20bypercent20Knightpercent20Frankpercent20haspercent20foundpercent20that,thepercent20UKpercent20stoodpercent20atpercent20percentC2percentA385.8bnpercent20thispercent20year.
Supply:
https://www.savills.com/research_articles/255800/305399-0#:~:textual content=Preferencepercent20forpercent20purposepercent2Dbuilt,inpercent20PBSApercent20vspercent20domesticpercent20students
Supply:
https://studytravel.community/journal/information/0/31188#:~:textual content=Occupancy:%20Thepercent20averagepercent20occupancypercent20rate,topercent20accesspercent20thepercent20fullpercent20report.
Supply:
https://studytravel.community/journal/information/0/31188#:~:textual content=Occupancy:%20Thepercent20averagepercent20occupancypercent20rate,topercent20accesspercent20thepercent20fullpercent20report.
Supply:
https://www.jll.com/en-uk/insights/uk-construction-perspective-2025#:~:textual content=Constructionpercent20materialspercent20havepercent20beenpercent20more,pushedpercent20uppercent20contractorpercent20labourpercent20costs.
Supply:
https://www.forsters.co.uk/news-and-views/pbsa-and-the-building-safety-act
[PT10]Supply:
https://www.gov.uk/authorities/publications/building-safety-bill-factsheets/building-control-regime-for-higher-risk-buildings-gateways-2-and-3-factsheet#:~:textual content=Gatewaypercent20twopercent20willpercent20bepercent20apercent20stop/gopercent20point,thepercent20Buildingpercent20Safetypercent20Regulatorpercent20beforepercent20relevantpercent20building
[PT11]Supply:
https://www.theguardian.com/training/2023/sep/27/uk-university-students-facing-unprecedented-rent-rises#:~:textual content=Manypercent20studentspercent20arepercent20strugglingpercent20topercent20findpercent20affordable,aspercent20muchpercent20aspercent2027percent25percent20inpercent20onepercent20case.
[PT12]Supply:
https://commonslibrary.parliament.uk/research-briefings/cbp-7976/
[PT13]Supply:
https://www.gov.uk/authorities/information/tough-government-action-on-student-visas-comes-into-effect
[PT14]Supply:
https://www.hesa.ac.uk/information/20-03-2025/he-student-statistics-2324-released#:~:textual content=Totalpercent20higherpercent20educationpercent20studentpercent20numbers,thepercent20firstpercent20timepercent20sincepercent202014.&textual content=Accreditedpercent20officialpercent20statisticspercent20releasedpercent20by,thepercent202023/24percent20academicpercent20year.
