Student Accommodation Investment
What is Student Accommodation Investment?
Student accommodation investment refers to purchasing a student house, room or pod to rent the property out to a student. Student accommodation investment is one of the most secure investments available thanks to the ever-increasing shortfall of student beds compared to the increasing number of students.
Student Property Market Overview
Data from the Higher Education Statistics Agency (HESA) found that in 2021/22 there were over 2.8 million students in higher education in the UK, increasing by over 18.5% in the last 5 years alone. Non-UK students in particular have seen a huge increase in numbers, rising by an impressive 44.9% in the same time period.
According to CBRE, these all-time high student numbers are resulting in a huge increase in demand for Purpose-Built Student Accommodation (PBSA) as universities continue to struggle to meet the demand for student beds. This increase has resulted in rental growth prospects for the sector to look extremely strong moving forward.
Advantages of Student Accommodation Investment:
1. Extremely high demand
According to historic HESA data and Savills projections between the 2016/17 and 2022/23 academic years, the number of full-time students in the UK will have increased by over 15% in the UK. These elevated numbers are only further increasing the demand for private student property.
2. Lower entry points
Due to the predominantly smaller units on offer, student properties tend to offer significantly lower entry prices when compared to residential and commercial properties.
3. Higher rental yields
Student investment properties also usually offer higher rental yields when compared to residential properties. This is thanks to the aforementioned lower purchase price.
4. Less frequent void periods
Given the immense demand for privately owned student accommodation, void periods within the standard academic year are much less likely to occur, especially as student numbers continue to rise.
5. Recession-proof
One of the biggest positives of investing in student property is the fact that these kinds of properties are very rarely impacted by external economic uncertainty or house price fluctuations. Throughout the last few years of instability, student numbers have continued to increase, further highlighting the stability of student property investment.
Best Locations for Student Accommodation Investment
Student Property Investment in Manchester
Three of the top universities in the UK are located in Greater Manchester. The University of Salford is one of the leaders in Arts, Media, and Creative qualifications with a state-of-the-art studio in the heart of MediaCityUK. The University of Manchester is the largest single-site university in the UK and a member of the prestigious Russell Group of universities. Manchester Metropolitan University is the top sustainable university in the UK and one of the most popular choices in the country.
Manchester has had a significant influx of new students as a result of the impressive cluster of local universities. With over 100,000 students enrolled in the institutions, the city has one of the largest student populations in all of Europe, making it a great place to invest in student property.
Student Property Investment in Sheffield
Sheffield has excellent investment potential, especially when it comes to student property investment. The city offers the perfect chance for anyone interested in investing in one of the leading markets in the UK. It is home to two prominent universities and over 65,000 students.
Sheffield’s population has increased significantly in recent years, as has the number of international students, which has increased by 30% to 11,000 in just five years. These figures alone show how desirable Sheffield is as a location for investing in student accommodation, especially when you take into account the lack of purpose-built housing. This has created a hugely profitable market gap for investors to capitalise on.
Student Property Investment in Stoke
Stoke-on-Trent is home to the esteemed Staffordshire University. There are roughly 15,000 students enrolled at the institution, many of them are part of Stoke-on-Trent’s sizable student population. According to Savills, the city’s student population climbed by 5% in the past year alone, one of the largest rises in the UK. It is easy to understand why.
With the university continuing to attract students from across not just the UK but internationally, the demand for purpose-built student accommodation in the region is only going to increase, and with the current shortfall of quality student beds in the area, now is the perfect time to invest in the Stoke student market.
Student Accommodation Must-Haves
How can you make your property appeal to the student demographic?
Good Wi-Fi – throughout their individual courses, students are required to complete a variety of research projects and post a number of assignments. Fast internet can be very helpful for this, relieving the stress of upload failures and poor web loading times. Students utilise the internet for more than just coursework and research; they also use it to stay in touch with loved ones during downtime, particularly if they have relocated away from home for school.
Double Bed – compared to the typical single beds available in most student dorms, a double bed provides more comfort, resulting in a better night’s sleep and more space for relaxation. A double bed also makes it possible for visitors to stay, particularly after a student has moved away from home: friends, family, and significant others.
Desk and Chair – even though it may seem obvious, any student accommodation must include a desk and chair. There are a lot of assignments, research projects, and revisions that must be done outside of class hours, which results in a very high workload at universities. A desk and chair in a student’s room provide a private study environment in the convenience of their own home, allowing them to focus and get into the zone to do the essential work.
Should I Invest in Student or Residential Property?
It can be difficult to decide on what kind of property you should invest in. Whilst commercial property investment is an option, the extremely high entry prices can often put investors off and many turn their attention to either student or residential property investment.
In order to decide which investment is right for you, you first must decide on what your goal is when it comes to investing. For example, if you are looking to purchase a property and capitalise on the forecast house price growth by reselling at a higher value in a few years, residential is the property for you. On the other hand, student property offers consistently high rental yields and, thanks to the unwavering demand for student beds, is less likely to experience void periods. Student properties are also available at a lower entry point when compared to residential properties.
Both types of properties have their strengths, and it really comes down to what you’re hoping to achieve from your property portfolio. There is also the option of diversifying and investing in both property types, this way you have a long-term investment in the form of student property that will hold its value whilst returning high rental yields, as well as a residential property that will also result in strong rental returns and will benefit from any house price increases in the UK market, allowing an investor to sell at a higher price than the initial purchase price.
Student Property Market Statistics:
- 2.8 million
Over 2.8 million people were enrolled in higher education in the 2021/22 academic year. (HESA, 2023)
- 18.5%
There has been an 18.5% increase in students enrolled in higher education in the last 5 years. (HESA, 2023)
- 44.9%
The number of non-UK students in higher education has increased by an impressive 44.9% in the last 5 years. (HESA, 2023)
Student Accommodation Investment FAQs
Can I get a mortgage on a student property?
Mortgages aren’t available for student rooms – it is a cash purchase or through using funds lent on another asset, i.e. the re-mortgage of another property.
Who will manage my student accommodation?
Most PBSA developments are let and managed by a specialist provider. The management company is responsible for sourcing tenants, managing any maintenance issues and collecting rent.
Can I sell my PBSA unit on the open market?
Yes. Like most normal leasehold properties, PBSA rooms can be sold freely on the open market, however, they must be sold as a student rental property.
Can I live in the property myself?
No, you cannot live in your PBSA. These properties are specifically designed for students and are not allowed to operate as residential property due to leasehold restrictions.
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