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Should I choose student accommodation investment?

Student accommodation investment refers to the purchase of a student house, room or pod with the intention of renting the property out to a student. You may ask yourself questions like ‘Why should I invest in student property?’ or ‘What are the benefits of student accommodation investment?’ – well, we’re here to answer that for you! For years, universities have struggled to cope with the consistently increasing demand for student beds, resulting in an increase in demand for privately owned student accommodation.

This increase in demand has seen the private student accommodation investment market absolutely boom in recent times, offering an extremely prosperous opportunity for those looking to invest in property. According to Savills, investors spent over £2.5 billion in the UK Purpose-Built Student Accommodation sector throughout 2021, a massive increase from the year prior. This increase in investment further showcased just how strong the market is performing.

The student accommodation investment sector is extremely well placed to perform well going forward, despite a period of instability and uncertainty over the last few years. The UK has seen a large influx of international students in recent years, with thousands hoping to pursue their desired courses at one of the numerous world-renowned UK universities. In 2020/21 there were over 749,000 applications to UK higher education institutions, including over 140,000 international students, in addition to those students whose home country is the UK.

With more and more students choosing to study in the UK every year, the demand for privately owned student accommodation is only going to continue.

Student accommodation investment offers higher yields

One of the biggest advantages of investing in student property is the predominantly higher yields available in the market. Generally speaking, students typically pay significantly higher rents than other tenants in comparison to the property price.

According to a report from Paragon bank, student properties in England have delivered a mean gross yield of between 6.15% and 6.6%, compared to a range of 5.43% to 5.6% in the residential private rented sector. This difference over the last five years has seen student market yields out-perform those in the residential market by a cumulative 13.2% to 17.86%.

You can invest in student property at a lower entry price

Another advantage that student accommodation investment has over the likes of residential or commercial investment is the significantly lower entry prices. Most student properties are usually found on the doorstep of university campuses or along the outskirts of city centres and, as such, are usually a lot cheaper to invest in.

Student apartments or pods are also usually a lot smaller than a standard residential apartment which again results in a lower entry price. This lower entry price is a factor into the aforementioned higher yields, resulting in a much better ROI through rental income over a shorter period of time.

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Student property market statistics:

 

750,000

Almost 750,000 people applied to University in the UK in 2021. (UCAS, 2021)

11.6% increase

There has been an 11.6% increase in UK domestic student applications in 2021. (Savills, 2021)

£2.5 billion

Over £2.5 billion was invested into Purpose-built Student Accommodation in 2021. (Savills, 2021)

17.1%

There has been an 17.1% increase in applications from foreign, non-EU countries compared to last year. (UCAS, 2021)

The demand for student housing is consistently rising

According to UCAS’ application data from 2021, there has been an 8.4% rise in university applications this year compared to last, massively spurred on by an incredible 17.1% increase in applications from foreign, non-EU countries. There were a staggering 130,000 UK university applications from Chinese students, students who are more than 2.2 times more likely to live in PBSA according to Savills’ UK Purpose-Built Student Accommodation Spotlight. In the same report it was found that applications from the US rose annually by a massive 60.7%, with American students 1.9 times more likely to live in PBSA compared to UK students.

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