Purpose-Built Student Accommodation Investment: On the Rise
This article was updated on Wed 31 Jan 2024
With trends and numbers in student property forever changing as time goes on, purpose-built student accommodation investment is growing by popular demand within the industry.
In 2021, the government’s international education strategy stated that the plan now includes targeting growth in international student numbers to at least 600,000 by 2030. With such high demand, it’s non-negotiable that student accommodation becomes an incredibly profitable area for property investors.
The introduction of purpose-built student accommodation
Presenting housing built by private developers specifically for students to reside, purpose-built student accommodation is becoming a successful solution to rising demands of students looking for beds that universities can no longer accommodate. So much so that the PBSA market is gathering a reputation. It is now the ‘golden goose’ of the residential investment sector.
PSBA delivers undeniable benefits for students. Benefits such as guaranteed security and a higher quality living space. Usually taking form as cluster flats or private studios. PSBA often offers fantastic leisure facilities to students. These facilities typically are fully equipped gyms, swimming pools and games rooms. – because of this, students are more than happy to foot the bill for the experience.
As more investors seek purpose-built properties and more students look for living space, there is room and opportunity for growth. The trend in PBSA is only going to continue to rise.
More students, fewer beds available
It is estimated that an additional 400,000 students will begin their studies at UK universities by 2030. International and first-year students cause a spike in the demand for purpose-built student accommodation. Simultaneously, second and third-year students are now also showing a desire for a purpose-built student property.
The increase in the number of students in the UK today means there are now 1.4 students for every purpose-built student bed on offer. A report from Knight Frank’s Student Property team has predicted that 24,000 additional beds were delivered in 2021, up from 14,000 in 2020. A year-on-year increase of 71% is difficult to ignore with the UK’s total now over 700,000.
Knight Frank has stated that the UK’s PBSA sector would reach a combined value of over £72 billion by the end of 2022. 2021 saw over half of the UK’s student accommodation bed stock on offer by the private sector. An increase by 39% since 2013. While universities take ownership of 69% of the current PBSA available, they are relying on the private sector to support the increasing student numbers. In the UK, 30% of first-year students live in private PBSA, which is an from 22% seven years ago.
The advantages of purpose-built student accommodation investment
PBSA comes with many advantages for investors. Below, we discuss the benefits and why more investors are looking at this type of investment rather than traditional avenues.
Demand is at an all-time high
One of the biggest reasons why yields are higher with PBSA properties in the UK is that demand is generally higher than supply within university locations. University accommodation has limits from the get-go. There is often even less accommodation available in the area. Students like the idea of PBSA because it appeals to their needs and requirements. Living in a space where paying one monthly fee covers rent, council tax, wifi and the perks of leisure facilities is a no-brainer. It will never be a struggle to fill such properties with tenants.
An easier investor experience
Investing in property often comes with landlord responsibilities. With PBSA, the developers will most likely hand over any maintenance and overall running of the property to an outsourced management company. This reduces the need for investors to deal with the stress that comes with being a landlord. Receiving a residual monthly income without the hassle and responsibility. The responsibility managing the property yourself is something that every property investor aspires to experience. Unless you want to get fully involved, you can sit back and relax.
A secure monthly income
Student rent will rarely fluctuate regardless of the location and payments are usually protected by a student guarantor. This means that no matter what the situation, you will receive the rent money.
Government incentives
The government offer a great incentive to encourage people to invest in this type of property in the UK. There is no stamp duty to pay on PBSA properties, which can save investors a lot of money in the grand scheme of things.
A clear investment
There is an obvious demand for purpose-built student accommodation across the country. Hotspots include large university cities like Manchester, Liverpool and Newcastle. Thanks to such exciting statistics, developers have the means to continue to produce. They can create a fantastic opportunity for investors and students alike.
The student accommodation sector is becoming a well-established market that remains attractive to investors. Are you looking to learn more about student accommodation investment? Get in touch with one of our experts today at [email protected] or call us on +44 (0)161 772 1370.
