Thursday, October 1, 2020
Real Estate

What you need to know for student accommodation investment UK

student accommodation

Student accommodation investment UK continues to draw the attention of international investors, and for good reasons. Savills highlights that property prices in key areas for education in the UK are as high as 37% over the last three years.

The thriving student population combined with high yields has made student accommodation investment UK an attractive option for many. According to Savills, investing in student property is on the rise – up 17%. Additionally, the number of international students coming to the UK to study is due to increase by 10% over the next decade.

Student accommodation typically has a high occupancy rate. It is easy to find new tenants and student accommodation investment UK provides an almost guaranteed source of income.

The rental levels and returns achieved on a typical student property investment are also usually higher than that of a non-student residential property, making it a lot easier for landlords to repay their student accommodation investment UK mortgage.

The student property market is on the rise as in-house accommodation facilities at many colleges and universities across the UK fall short of demand, generating immense potential for student accommodation investment UK. This gap between demand and supply offers a huge market for alternative investment.

Advantages of student accommodation investment UK

High demand

The UK’s major cities have a thriving student population, which means a corresponding high demand for homes. This applies even more to university cities, with especially large student population as these universities have too many students to house on campus.

High yields

Students generally need less space and are prepared to share properties with multiple people. This means even smaller properties have a good chance for high income.

Less hassles

Students tend to be less demanding and more adaptive than their older counterparts, meaning lesser hassles for landlords.

Student accommodation investment UK types

There are a number of different types of student accommodations to invest in.

Purpose-Build Student Accommodation or PBSA

This type of student accommodation is becoming the most popular around universities across the country. The advantage of PBSAs is that they are fully managed by professionals, making student accommodation investment UK a hassle-free investment.

Shared houses or HMOs

Houses of Multiple Occupancy or HMOs are popular among student landlords which allows for several tenants per property. This raises the number of tenants at a property and maximises the yield. It spreads risk and improve the ease of maintaining the property since a number of tenants are housed under one roof compared with renting out the whole of properties to families as such properties may be located at separate places and therefore, difficult to manage. Houses of Multiple Occupancies often include large properties with separate bedrooms and a few share areas.

However, it is necessary to be aware of the need of students for ensuring high occupancy of the property. Findings by Unipol, a student housing charity, found that students favour properties that are more like homes. Of the most important things students wanted in accommodation, a fully furnished property, with high speed internet and comfortable rooms were most sought. According to bmmagazine, the increase in demand for luxury student accommodation. An ever-increasing number of students are turning their attention to premium offerings, with the demand for purpose-built luxury accommodation doubling over the last 10 years.

Locations for student accommodation investment UK

A location near a university is the best possible choice since it reduces the cost of travel to the university. The closer the property is to the university, the better.

Access to good transport links

The property should be located near transportation links and hubs. This is particularly important to students who have to travel to their homes at weekends and require cheap public transport for that.

Number of other student accommodation in the area

Most cities have student-specific areas. A property at such a location ensures that it is occupied throughout the academic year.

Working spaces

Another important aspect of a student property is the working space. After all, study is fundamental to the purpose of students’ stay at a student property. So, this space needs to be considered carefully and ensured that there are good working spaces available at the property to allow students to work in private.

Return on Investment

This is the fundamental aim for student accommodation investment UK. Any investor will want to ensure good returns on investment. DIGS, a real estate investment trust that owns ten halls of residence across London, report that the net asset value of student property is up by 7.2% for the first half of 2018. The reason for this high figure is apparently due to an ever-growing number of applicants going to university, and an increase in rental price for student properties across the market. When investing in student property through a developer’s project, an investor needs to think critically about whether the firm will stand behind its ‘guaranteed’ returns. The success of the investment is essentially down to the rooms being occupied. If the company fails to market the property correctly, it may be unsuccessful, and you will not get a return on your investment.

Landlords insurance

Investors need to take landlords insurance to protect their investment. It is crucial to the investment as it covers a wide range of risks. Landlords insurance covers the investment from many types of accidental damage, such as fire, flood and broken infrastructure. An insurance cover may also cover rent payments if the property becomes uninhabitable due to an insured accident and help the landlord find alternative accommodation for students while the property is being repaired.

Therefore, with the number of students on the rise, the market is flourishing and there is great potential for student accommodation investment UK. Growing investment in student accommodation reflects the rising demand for student accommodation in the UK. Landlords have the option of investing through a developer or on their own. Student accommodation investment UK is one of the smartest decisions any property investor can make but investors need to make sure that the investment is appealing to the target student population.

Important:
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.

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