According to the MSCI Student Housing Property Index, purpose-built student accommodation (PBSA) rental growth in Q2 2024 was 1.8% and on a rolling 12-month basis was 7.0%. The BNP Paribas Real Estate UK Living Market Update Q2 2024 saw a surge in rental growth across the Living sectors, driven by high demand and tight supply underpinning performance in each sector.
There was £1.7bn of estimated investment into the PBSA sector in H1 2024 – 245% higher than in H1 2023. The PBSA sector stood out during a slow Q2 2024, where several large portfolio transactions boosted investment volumes.
Investors are increasingly drawn to the PBSA sector. They recognise the important role it now plays in the wider UK housing landscape. Overall, the PBSA sector continued to be the ‘darling’ of the Alternative sectors – and it is set to outweigh other living asset classes over the next 12 months, according to the BNP Paribas Real Estate report.
The Bank of England’s (BoE) recent interest rate cut – the first in over four years – has lowered the key rate to 5%. This cut would help boost the new Labour Government’s pledge to kick-start economic growth.
Labour’s emphasis on housing and planning has implications for the Living sectors and should act as supportive measures for the market’s continued growth.
“The Living sectors continued to attract interest in Q2 2024 with investors recognising the important role they now play in the UK housing landscape. The emphasis on housing and planning from the new Government has implications for the Living sectors and should act as supportive measures for growth.”
UK Living Market Update Q2 2024, BNP Paribas Real Estate
The latest raft of economic data provides cause for optimism, and financial market indicators add further credibility to the view that commercial real estate pricing is at a turning point.
That said, deeper analysis suggests there are a number of structural challenges to the new government’s mission to boost economic growth.
Further declines to core inflation, robust labour market data, and strong GDP growth have led to upward revisions to economic growth forecasts. However, the economy still faces challenges around labour supply, government finances and productivity growth.
