Rental growth slows in purpose-built student accommodation sector

Rental growth slows in purpose-built student accommodation sector

Rental growth in the UK’s purpose-built student accommodation (PBSA) sector slowed to 1.5% in the 2026/27 academic year amid affordability pressures and rising competition, Knight Frank reports.

Knight Frank’s annual UK Student Accommodation Outlook reveals a divergence in rental performance between university-owned and private PBSA, with university accommodation rents rising while private sector rents fell. This shift presents implications for buy-to-let landlords and letting agents involved in student housing.

The report highlights increased rental incentives and changing student preferences, reflecting a more price-conscious market and the growing importance of accommodation quality and location. Investment remains strong despite these challenges, with significant capital flowing into the sector.

Knight Frank’s findings on PBSA rental trends

According to Knight Frank, rental growth in the PBSA sector slowed to 1.5% during the 2026/27 academic year, down from previous years. This slowdown is attributed to affordability constraints faced by students and heightened competition among providers. The report shows a clear split in performance: university-owned accommodation recorded rental growth of 4.3%, while private direct-let PBSA rents declined by 0.7%, marking the second consecutive year the private sector underperformed compared to university stock.

Rental incentives also increased, accounting for 4.7% of advertised annual rent in schemes with availability in September, up from 4.2% the previous year. This rise indicates landlords and operators are offering more concessions to attract tenants amid a more competitive environment.

Despite the softer market conditions, investment in UK PBSA remains robust. Approximately £2.7 billion was invested in 2026, with £1.5 billion of assets currently under offer. North American investors are leading this interest, signalling confidence in the long-term prospects of the sector despite short-term challenges.

Contextual factors shaping the PBSA market

The report coincides with a 20% year-on-year drop in study visa applications processed up to September 2026, reflecting ongoing policy uncertainty and recruitment pressures at higher education institutions. This decline in international student numbers adds to the challenges faced by PBSA providers, particularly in the private sector.

Affordability remains a crucial factor influencing student accommodation choices. Knight Frank’s Student Accommodation Survey, conducted by UCAS, found that 89% of students consider accommodation costs important when deciding where to live. Additionally, 74% said they would be more likely to stay in PBSA beyond their first year if it were more affordable.

The survey also highlights the growing importance of accommodation availability, with 84% of students stating it influenced their choice of university application. This underscores the role of housing supply in university recruitment and retention strategies.

Students also view their accommodation environment as integral to academic performance and wellbeing, with around 90% recognising its impact on study outcomes and 88% acknowledging its role in supporting mental health. Notably, a third of students indicated they might use AI tools to search for accommodation and monitor pricing, reflecting evolving tenant behaviours.

Implications for buy-to-let landlords and letting agents

The divergence between university-owned and private PBSA rental performance suggests that landlords in the private student accommodation market face increasing pressure to enhance asset quality and operational strategies. The rise in rental incentives indicates that landlords may need to offer more competitive terms to attract and retain tenants.

For landlords with buy-to-let portfolios including student properties, this environment calls for careful review of rent levels, lease terms, and property standards to remain competitive. Letting agents should be aware of the growing importance students place on affordability, availability, and quality when advising landlords or marketing student accommodation.

The ongoing investment in PBSA, particularly from overseas investors, suggests confidence in the sector’s long-term value. However, the current market softness and policy uncertainties require landlords and agents to monitor developments closely and adapt strategies accordingly.

Considerations and uncertainties ahead

While the report provides valuable insights, uncertainties remain. The impact of future immigration policies on international student numbers could further affect demand for PBSA. Additionally, changes in university enrolment patterns and student preferences may continue to reshape the market.

Landlords and agents should also watch for potential regulatory changes affecting tenancy agreements, safety standards, and licensing in the student accommodation sector. The increasing use of technology by students to source housing may alter how properties are marketed and managed.

Given these factors, staying informed through official guidance and sector updates is vital. The evolving nature of the PBSA market means landlords and agents must remain flexible and proactive to navigate emerging challenges.

What landlords should consider now

• Review rent levels and incentives in light of increased competition and affordability concerns.
• Assess property quality and location to ensure alignment with student expectations and university priorities.
• Monitor changes in student demographics, visa policies, and university enrolment trends that may impact demand.
• Stay updated on regulatory requirements related to tenancy agreements, safety, and licensing in student housing.
• Consider adopting technology tools to enhance property marketing and tenant engagement, reflecting students’ growing use of AI and digital platforms.

Supporting landlords with compliance and portfolio management

Membership of The Landlord Association (TLA) offers access to compliance resources and practical information that can assist landlords and letting agents managing student accommodation portfolios. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is being developed to help organise properties, manage rental documents, and maintain records of inspections, repairs and communications.

ORBIT aims to support landlords in recording key compliance actions and monitoring regulatory developments relevant to the private rented sector, including tenancy law and safety obligations. While still in testing, it offers tools that could help landlords prepare for new challenges in the PBSA market and maintain evidence of compliance.

Exploring TLA membership and ORBIT BETA access can provide landlords and agents with resources to adapt to the evolving student accommodation sector and meet their regulatory responsibilities effectively.

Looking ahead, landlords in the student accommodation market should continue to evaluate their portfolios against shifting demand and regulatory landscapes. Proactive management and engagement with sector developments will be essential to sustain rental income and meet tenant expectations.

Sources: Landlord Today