8th Jul 2024 11:40
(Alliance News) - Unite Group PLC's trading update showed continued strong demand, with rental growth amongst the strongest in the sector, analysts on Monday said.
In a trading statement on Monday, the Bristol, England-based owner and manager of student accommodation said it is confident in achieving 98% to 99% occupancy for the 2024-25 academic year, with 94% of rooms already reserved.
Rental growth is expected to be at least 7%, revised up from previous guidance of 6%.
Recent changes in UK immigration policy have not hurt demand for housing from international students, while Unite welcomed support for the university sector from the incoming Labour government.
Property values increased in the second quarter of the year, the company said. Up 3.2% to GBP2.93 billion for the Unite UK Student Accommodation Fund as of June 30 and up 2.8% to GBP2.00 billion for the London Student Accommodation Joint Venture.
Unite Chief Executive Officer Joe Lister said student demand remains strong from both domestic UK and international students.
Unite said 18% of its portfolio has been taken by international students, down marginally from 19% for the 2023-24 academic year.
"We have not seen a meaningful impact from the removal of visas for family members of international postgraduate taught students, which reflects the single-occupancy nature of our properties," the company explained.
It added: "The Labour Party manifesto recognised the soft power and economic value of UK higher education and stated an ambition to improve access to university for a growing 18-year-old population.
Peel Hunt said the update showed strong demand for Unite's accommodation continues, with demand from international students robust.
The broker observed the increase in rental growth was amongst the strongest in the sector.
"We continue to see the [purpose-built student accommodation] sector as offering an attractive blend of earnings and asset value growth," the broker added.
Peel Hunt reiterated an 'add' rating on Unite.
Stifel was also positive on Unite, reiterating a 'buy' rating.
"Our buy rating for Unite is driven by demographic tailwinds driving a demand that is currently unmet by projected supply," the broker explained.
Stifel pointed out the number of 18-year-olds in the UK is set to increase by nearly 19% by 2030.
At the same time, the broker noted capital constraint has curtailed development and this supply shortage has been further exacerbated by private landlords exiting the houses in multiple occupancy market.
All of this has been supportive of occupancy, Stifel said, with the resultant high levels feeding through into continued strong rental growth.
Stifel thinks the shares can continue to outperform given the strength in the purpose-built student accommodation and it's well-funded balance sheet.
Shares in Unite rose 0.3% to 921.00 pence in London on Monday.
By Jeremy Cutler, Alliance News reporter
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