Property investment has traditionally been a popular option for the majority of investors. However, the property sector includes a number of subsectors, with each offering a different level of potential profits ,gains and pitfalls. The student rental market is one such sector which is seeing high levels of demand. The demand is particularly high for university cities as they attract a large number of students every year. This has led to a rise in student accommodation investment UK over the past few years.
Student accommodation as an investment refers to purchasing and owning a property for the purpose of letting it out to students and generating income through rental payments. However, the region and location of the student property accommodation is important.
Recent student accommodation trends in the UK
According to a study by the National Union of Students, out of every ten students in the UK, four deemed their accommodation as substandard. *Many of the issues students encountered revolved around the property itself, with 42% of students reporting problems with damp and insulation, and 16% experiencing electrical issues.
So, there is more demand for high-quality purpose-built student education compared with those offered under traditional housing and university-provided accommodation.
This highlights the fact that students in the UK favour modern and high-quality accommodation over the more traditional shared student housing. Students tend to be interested in accommodation that supports their studies and lifestyle. The majority of students prefer accommodation that’s well-located, well-decorated, comes with good access to WiFi, and include built-in appliances like white goods and other gadgets.
The benefits of student accommodation investment UK:
No property venture can succeed without demand. High levels of demand are essential in order to receive consistent rental income from a regular stream of tenants. In the UK, student investment properties are in high demand as there is a large student population. Attending university is now much more common than it has been in the past, with record numbers of students being accepted onto a university course.
During 2017 and 2018, a total of 2.3 million students were accepted in UK institutions according to the HESA Student Record. Out of these high numbers, a large proportion is from overseas. The high number of international student puts the United Kingdom on the map as the second most popular study destination in the world. *Students from China, Hong Kong, India, Malaysia and the US make up for 38% of enrolments in universities across the UK.
A desirable tenant group
Students are often considered one of the best tenant groups to rent to by a lot of investors. There are a number of reasons for this.
One reason is that student tenants tend to have a guarantor in the form of a parent or guardian, so you may not suffer from any loss of income if the tenant couldn’t meet rental payments.
Another reason is that since for the majority of students, living in student accommodation will be their first experience of living away from home, they’re likely to treat their landlord respectfully and avoid any issues. Moreover, students are a lot more security savvy now-a-days, seeking private student apartments with CCTV, and following any tenancy rules, whether this is to do with limiting visitors/parties in the property or keeping their accommodation clean and tidy.
High rental yields
Student properties, especially those in the form of a studio apartment, tend to have lower purchase prices than residential properties. While purchase prices are low, however, rental returns remain considerably high, especially with more luxury student accommodation opportunities. This combination of low property prices and high rental returns results in some very attractive yields for student property investment.
Along with demand and rental returns, capital appreciation is also a big part of all investment strategies and another major element to consider when searching for a UK student accommodation investment opportunity. Capital appreciation is when a property grows in value over time. This is an important part of your strategy, as it ensures you make a significant return on your investment when you choose to sell it further down the line, maximising your overall returns alongside your rental income.
With the student property market growing in value, and the student population ever increasing, things could be bright when it comes to the future of student property investment.
The UK is one of the most popular areas for overseas investment. According to research conducted by Knight Frank in 2017, 70% of UK student investment came from overseas buyers. All five of 2016’s biggest student property deals involved international investors, with the most significant deal being 25 student buildings across the UK which was purchased by a Singapore state investment fund. This highlights the strength of the student housing market in the UK and the overall benefit it has to the country’s economy.
The UK has a strong process in place when it comes to foreign property investments. Overseas investors purchasing a student investment property in the UK are guided through the process by the property company selling the investment, a solicitor, and a financial advisor if necessary. This way, foreign investors involved in buy to let student accommodation will understand what’s involved with a UK investment, being offered information on things like taxes and buy to let mortgages.
As with any property investment, the location of the student buy to let investment plays a big part in the venture’s overall success. As already mentioned, rental yields, demand, and capital appreciation are the most important elements of a student property investment, and the potential behind these can vary depending on the location of the property.
Thinking into the future is so important with all investments, so this is something you should factor into your student accommodation investment.
*Source – (https://www.nus.org.uk/en/news/homes-fit-for-study-report/)
*Source – (https://www.y-axis.com/news/top-countries-with-most-international-students/)
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.