Property & Mortgages

Things to know for student accommodation investment UK

student

The UK student accommodation sector continues to receive high levels of investment which includes investors from within the UK as well as overseas-based investors. Student accommodation investment UK is rising as a reflection of high demand for rental properties among students. As universities are falling short of accommodation due to the rising number of students enrolling into universities, student-exclusive properties are coming up near and around universities all across the country.

This has led to a rise in student accommodation investment UK and commercialisation of the student living space, which has now become an attractive investment opportunity for local as well as foreign property investors.

Why invest in UK student accommodation space?

The student property sector in the UK has been booming over the past few years and it is the highest-yielding property asset since 2011. As universities across the UK offer high quality education, they attract students from all over the world. Apart from the EU, students from other parts of the world are showing keen interest for admission to UK universities.

So, as the number of students rises, so is the demand for more rental properties. One option for students is the buy to let, but it is proving to be an expensive option for students as the demand for accommodation far exceeds the number of new BTL properties coming onto the market. This is part of the overall shortage of homes across the UK property market. Apart from this, the buy to let sector is not a specialised sector oriented towards student living and lacks in student-specific facilities. A standard buy to let may also be a property located away from the places of education, making it difficult for commuting to the university.

As opposed to the BTL sector, the specialised student accommodation sectors such as the Purpose-Built Student Accommodation or PBSA offers a number of advantages to students. As these properties are developed around student needs and accommodate a large number of students at one place, they are more popular among students. These properties provide all the specific facilities that students may require, making it the preferred option for students. Moreover, there is a new trend which shows that students are preferring to live in communities in contrast to living at rented homes. These factors have contributed to the idea of specialised student living, which can now be seen everywhere across the UK. Student accommodation investment UK has emerged as a better option for investors, too, as it provides for a rental income over the long term. It has proved to be an assured and stable property investment. The commercial student living space is not affected by the fluctuations seen in the UK residential property market seen over the recent years.

Rising student numbers

In 2016 there were record student numbers of around 550,000, the vast majority of whom will live away from home and therefore require housing. The number of overseas students increased markedly in 2016 and UCAS figures from 2017 tell a similar story – in fact, 2016 and 2017 were the years that saw the highest number of applications to UK universities from EU students ever recorded.

The shortage of homes in the UK has also been exacerbated as a large number of students are renting residential properties. The pace of construction of new homes in the UK has not been able to keep up with the country’s rising population. According to a forecast by RICS, there will be a shortage of 1.8 million homes by 2025.

This massive shortage means that the 707,000 students currently occupying housing in the private rented sector are living in homes that are desperately needed by local families according to the Higher Education Statistics Agency (HESA). This is another factor in support of Purpose-Built Student Accommodation. The development of specialised student housing will mean housing for students, while putting less pressure on residential properties.

What students look for?

Some of the UK cities have more PBSA properties compared with others. For example, cities such as Liverpool have seen plenty of PBSA construction but still have lot of scope for investment. The city has only 49 per cent supply of purpose-built student accommodation which shows that approximately half of all students are already living at purpose-built properties which means there is a huge potential for student accommodation investment in the city. Apart from Liverpool, there are a number of other areas which offer a lot of potential for student accommodation investment UK which include areas such as Huddersfield, Preston, Sunderland and Bradford where property investors can hope to reap rich rewards as the supply levels for these areas is less than 20 per cent. As the supply of Purpose-Built Student Accommodation is these areas is very low, it may be a good opportunity for investors to enjoy a potentially high rental income at these areas. It should be remembered that the scope for growth in the PBSA sector is irrespective of the size of the city. Bigger cities don’t always mean the highest yields in case of UK Purpose-Built Student Accommodation as the bigger cities may already have more PBSAs compared with the relatively smaller cities. This is because bigger cities mean more competition and students have more choice when it comes to the organised student living space, which may mean lower levels of rental income.

Choosing the right location for student accommodation investment UK

As with any property investment, the location of the property is hugely important. This is even more so in case of student accommodation space as the demand for student properties is high around or near the universities. Therefore, it is necessary to identify areas with high demand for student living space. But, it is also important to consider the supply in the area. A student-exclusive area with relatively lower demand which is low on supply too, may offer more potential compared with a student-majority area which is high on demand as well as supply.

Therefore, student accommodation has been a high-performing investment over the past few years which is predicted to continue to grow in the future, meaning a lot of potential for student accommodation investment UK.

Risk Warning:

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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