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.
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)
Best locations for student accommodation investment
Sheffield
Sheffield has significant investment potential, particularly when it comes to the Purpose-Built Student Accommodation market. Home to two prestigious universities which are growing fast and have around 60,000 students, the city offers the perfect opportunity for those looking to invest in one of the UK’s leading markets. The population in Sheffield has flourished in recent years, as has the number of international students which has grown by 30% in just five years to 11,000.
Manchester
Whilst the impressive growth of the Manchester residential property market is consistently covered, the student property market has performed equally as well in recent times. Home to leading universities such as Manchester Metropolitan University and the University of Manchester within the city centre, as well as the University of Salford on the outskirts, the city is one of the most exciting locations for students to study, with over 99,000 throughout the Greater Manchester region.
Stoke-on-Trent
Stoke-on-Trent is home to one of the most popular universities in the country in the form of Staffordshire University. The establishment was recently named 4th in the Best UK Universities category, at the StudentCrowd University Awards, only enhancing the university’s already impressive reputation. Staffordshire University is home to around 15,000 students, with that number consistently increasing each year. In the last year alone, there was an impressive 5% increase in the number of students in the city according to Savills, bettering the likes of London, Birmingham and Glasgow to name a few.
Newcastle
Newcastle is home to one of the UK’s leading universities in the form of Newcastle University. The university is home to over 25,000 students from over 140 countries and is one of the most popular in the UK thanks to the excellent education on offer as well as an extremely desirable student lifestyle in the area. Newcastle University has an outstanding reputation for academic excellence, and with an extremely high graduate employability rate, the university continues to be a popular first choice for students around the world, and as a result, an excellent location to invest.
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