Student housing is increasingly becoming an attractive prospect for investment, with a 17% increase in investment in student accommodation in the UK every year.
The student accommodation sector has gone through a dramatic transformation over the past decade. Previously, student housing comprised dated halls of residence and low-quality HMOs, where the main choice students had was between the location and the distance to university facilities.
There is a growing pressure to deliver modern environments that offer quality, connectivity, safety and security in a well-located residence. Social interaction space is also a growing priority, especially in multi-purpose formats: communal study space, larger dining areas, space for a gym or mini-cinema may be part of the residence or form a social hub outside of the main accommodation but in the same block.
Furthermore, in an increasingly health aware society, outdoor facilities such as exercise trails are progressively seen as must have provisions for university owned accommodation facilities.
Another major factor is the rising number of overseas students studying abroad. As it will be the first time for many students to live independently, the student’s safety is a high priority for their family, therefore parents are willing to pay more to ensure their child’s well-being.
University-owned accommodation is no longer the only option. Build to Rent developments are starting to expand quickly across the UK. According to recent data from the British Property Federation, the total number of Build to Rent homes completed in the country has increased by 30% in the past year. With the rise of Built to Rent developments, those studying have now come to expect the high specification, services and amenities that purpose-built student accommodations (PBSA) offers.
Investing in purpose-built student accommodation
Investing in purpose-built student accommodation is the best solution for areas which have a high student population. As the number of university students has continued to grow in the UK it has become more difficult for universities to keep up with demand and provide accommodation within halls for students who are not in their first year.
In the past, students opted for ‘family housing’ but since recent HMO laws have made renting from small landlords difficult and students increasingly want their own private space, private accommodation is making for a more attractive investment prospect.
It can be difficult for universities to provide accommodation that has adequate living space and additional facilities in prime locations, particularly in city areas such as London where property and rent prices are the highest in the country.
However, student statistics indicate that price is not always a determining factor, and in many cases, students are eager to pay higher rental costs in exchange for better living standards.
PBSA yields are around 50% higher than that of residential housing and is currently strongly backed by the government due to housing shortages. Investments can be bought fully managed, making the job of the property owner much easier.
Finding the right location is key
Research by Savills at the end of 2017 highlighted Bristol, Leeds and Nottingham as some of the best places to invest in student accommodation. While it may be more difficult to achieve high yields in cities such as Bath, Cambridge and Bristol, areas like Nottingham and Newcastle tend to have more affordable property prices.
Investing in Durham and Nottingham can be fruitful as low property prices offer a sound option for first-time investors looking to get on board the property ladder. The universities in these cities also perform well on league tables, which is crucial for attracting students.
However, increasingly investors are seeing the advantage of investing in these areas. Nottingham is currently benefitting from a period of strong property price growth in the last year, at a rate of 8%.
Other ideal areas for investing in property housing tend to be situated in the North, including Sheffield and Liverpool, where both demand and rental yields are high.
Liverpool is currently undergoing a £14 billion regeneration programme, set to redesign the city’s urban landscape and deliver 10,000 new homes to aid the city’s investment opportunities. This, in addition to its 50,000-strong student population, makes it an exciting prospect for investors seeking a safe bet.
Demand for student housing in Sheffield is also assured. With 70% of students in Sheffield admitting that they do not have access to university accommodation and with a strong population of international students, which is only set to rise, demand for new developments in Sheffield is growing significantly.
*Marc Trup is the Founder and CEO of Arthur Online