Unite Students has posted a loss of more than £400m after a £500m revaluation of its properties and what it described as “extremely challenging” building costs.

The UK’s largest student landlord reported a £417m pre-tax loss in the six months to June, compared with a £186m profit a year earlier, as earnings fell 2 per cent to £142m.

The FTSE 250 company has been dealing with lower occupancy in recent months and has been cutting rents in an effort to move stock, highlighting the pressure facing the purpose-built student accommodation market as demand patterns and affordability shift.

Unite said a revaluation of its property portfolio reduced profit by £530m. Following a strategic review, the group said it is taking “ambitious” steps to dispose of up to £400m of property as it seeks to focus on students at the UK’s “strongest” universities.

The landlord generated £130m from property disposals in the six months to June and said it aims to sell as many as 20,000 more beds as it reduces its footprint.

Unite cuts rents to drive occupancy

The company said it expects rental growth of 1 per cent to 2 per cent for the current academic year after “targeted” price cuts on campuses including Leicester, Nottingham and Sheffield.

Unite said those discounting measures are expected to support occupancy, which it forecast will reach between 94 per cent and 96 per cent this year. The company said occupancy had been running below previous years’ levels in recent updates.

Unite bought student accommodation rival Empiric in August last year, and said on Tuesday that the deal helped drive an 11 per cent increase in rents to £262m.

However, analysts at Quilter Cheviot said the acquisition contributed to a 7 per cent fall in earnings per share to 27.1p.

While most property acquisition deals are “immediately accretive to earnings,” Unite’s purchase of Empiric “came at just the wrong time,” said Oli Creasy, head of property research.

“Unite is a company under pressure. For investors, today’s results are a confirmation of earlier fears, with the company share price materially underperforming the wider real estate investment trust market year-to-date,” he said.

Landlord warns over student housing supply

Unite warned that the supply of student accommodation is likely to “tighten” over the next few years as new construction slows and multiple-occupancy, or HMO, landlords leave the sector.

“Higher build costs and new regulation have made development of new student accommodation extremely challenging,” the company said.

It said it would need to charge £300 a week, well above its average £190 rate, to make new development viable outside London.

The group also criticised the Renters’ Rights Act, saying it is encouraging private landlords to exit the sector, alongside rising mortgage costs.

“Obsolescence of older student accommodation also continues to see beds removed from the market each year due to age, high running costs and the need to deliver a higher-quality experience for students,” Unite added.

Shares in Unite fell 3.4 per cent to 538p in early trading.