Growing demand for university places, with a 12 per cent rise in applications this year, had sustained robust growth in student accommodation rents says a new report.

Property consultants Knight Frank said rents grew by around five per cent a year over the past six years, compared to a 0.6 per cent rise for commercial property.

University cities such as Leeds saw rents grows by as much as 13 per cent in the six-year period.

Knight Frank said the student accommodation property sector was maturing and becoming recognised as an important element of the wider property investment market. Since mid-2009, there had been increased demand for assets producing secure income.

Early indications for 2010-11 show that student rents will continue to rise by five per cent for en-suite accommodation, with other rents staying level. This compared favourably to other commercial rents and highlighted the resilience of the student accommodation market in the downturn.

Knight Frank said the growth in student numbers, from 1.8m in 1996 to around 2.4m this year, was expected to continue and had been a major driver in pushing up rental values.

The majority of key university towns reported nearly 100 per cent occupancy last year, boosted partly by a rise in overseas students, which was predicted to increase more in the next academic year.

In October 2009, UCAS, the university admissions body, recorded a 16.6 per cent increase in foreign applicants, including a 27 per cent increase from Chinese students.

Growing demand for accommodation from post-graduate students had also boosted the market. They and foreign students preferred professionally-managed properties and were less price-sensitive than other student categories.

Knight Frank said the supply of new student accommodation remained limited and many regional cities still did not have a good mix of different types of accommodation – which provided an opportunity for developers and investors. Lower land values offered equity-rich developers a good opportunity to invest in the student property sector.

Knight Frank said bankers were still willing to lend at around 60-65 per cent on student projects, which was higher than for other property classes. It meant that there were increased opportunities to acquire sites in locations previously considered too expensive for student housing.

Tim Goddard, of Knight Frank, said: “The underlying market fundamentals for the student property sector are positive, with supply restricted and strong demand underpinning rental growth. Given the lack of finance currently available for development and the constrained pipeline, rents are likely to continue to rise for the foreseeable future.”

Another report into bank lending in the commercial property sector said the market was taking its first tentative steps to recovery. Despite the problems of a number of key lenders, banks had retained their faith in property