Student rents in Newcastle have risen at more than twice the rate of inflation to an average of £140 a week, a study has revealed.

North East property consultancy GVA has carried out its latest student housing report, which shows how Newcastle continues to be a popular location for students and investors, with thousands more beds set to come in a raft of planned student accommodation schemes.

The report also highlights how rents reached an average of £140 in the city last year, a rise of 4% year on year – more than double the 1.8% that consumer prices rose by in the year to January 2017.

More than 2,000 students beds have been created in new purpose-built schemes in the city over the last two years, and that figure is set to rise according to the property firm’s study, with planned schemes set to bring an 6,000 extra beds to the city.

There are currently more than of 43,000 full time students in the city, an increase of approximately 2% on last year, of which nearly 10,000 are international, and rents are on the up.

Roger Speirs, Regional Senior Director, GVA Newcastle
Roger Speirs, Regional Senior Director, GVA Newcastle

Roger Speirs, regional senior director at GVA’s Newcastle office, said: “Rents in Newcastle have continued to grow over the past 12 months, with average rents in the city reaching £140 per week, a 4.40% increase on last year.

“The market has proved attractive with both domestic and international investors who realise the security of the income and the prospects of further rental growth”.

Noteworthy transactions over the past year include the purchase of St James’ House for £16.5m and St James’ Point One and Two for £35m, both of which achieved net initial yields in the region of 6%.

The deal followed transactions in which Empiric Student Property bought up two schemes – Metrovick House and a Claremont Road project – in deals collectively worth £18.5m, and Metnor Group building and selling a portfolio of student accommodation properties in Newcastle to one of Singapore’s largest private property developers for £40.6m.

Roger Lown, senior director and head of student housing at GVA, said: “The private purpose built, student housing market in Newcastle has evolved greatly over the past 10 years, with the opening a large number of schemes that provide high quality accommodation, in central locations, solely for the students and independent of the universities.

“This market now provides over half of the total purpose built accommodation in the city.

“Over the past two years, approximately 2,000 beds have been added to this private sector market.

“This includes the Tyne Student Living, a 386-bed scheme operated by Fresh Student Living and Vita Student Newcastle on Westgate Road, a high specification, 259-bed, studio scheme."

An increasingly large development pipeline remains in the city, with developers recognising the prospective gains of student housing as an alternative to traditional commercial and residential uses.

Vita Student building on Westgate Road, Newcastle
Vita Student building on Westgate Road, Newcastle

The report found there are approximately 6,000 beds in the development pipeline, of which 1,100 are due for completion in September 2017.

This includes The Shield, a 409-bed scheme on Stoddard Street and Vita Student Strawberry on Strawberry Place.

While many of the schemes in the pipeline are yet to commence construction or have not yet been granted planning permission, GVA believes that if this full influx were to hit the market, there could potentially be oversupply, making location imperative to the future success of schemes in Newcastle.

The recently launching levy on developers may also have an impact, as it may put them off.

The Community Infrastructure Levy (CIL) sees developers having to make payments to Newcastle City Council per square metre of their planned development.

The average cost of a CIL payment at planning approval for student housing is around £175 per square foot in London and £75 per square metre in most regions, but £50 per square metre in Newcastle.

Roger Speirs added: “The city council have introduced a Community Infrastructure Levy (CIL) on new student accommodation developments at £50 per square metre which could also materially impact on scheme feasibility appraisals.”