Is Student Property a Good Investment?
In the last decade, student property investment has seen huge growth, with investors worldwide looking to capitalise on the demand for student accommodation in university cities across the UK. But, you still might be wondering “Is student property a good investment?”, and we’re here to help answer that question.
More than ever student property is becoming an integral part of a property investor’s portfolio. While there are many opportunities, investors should pay attention to drawbacks and be sure to seek out properties presenting higher yields and steady occupancy levels to ensure a student property becomes a good investment.
Student property investments can offer investors a number of advantages. But there are also certain downsides that should be kept in mind before embarking on this property investment journey.
Below, we weigh up some of the pros and cons of student property investment, important factors investors should consider and the best locations in the UK to invest in student accommodation.
What are the Benefits of Investing in Student Property?
A few key factors make student property a good investment:
- Firstly, student properties are often cheaper to buy due to their location on the outskirts of city centres and on the fringe of campuses, making them a more affordable investment.
- Secondly, as students typically pay higher rent than other tenants, such as a single-family, student landlords can expect significantly greater yields. In the right location with the right property, yields of up to 20% higher for a shared student house are possible.
- In most student cities there is a steady demand for student accommodation, giving landlords access to a stream of tenants and a lower chance their student investment property will remain unoccupied.
- The lower cost of student property compared to other types of property also makes it more accessible to first-time investors.
- Investing in student property can be a great opportunity for investors looking to benefit from the increased demand for student accommodation. With the right location, the right property and a good investment strategy, investors can expect high returns
What are the Drawbacks of Investing in Student Property?
While there are many positives to acquiring a buy-to-let student property, investors should also be aware of some of the drawbacks:
- Renting to the student market typically poses higher levels of wear and tear, and investors should be mindful of possible higher annual upkeep costs.
- Extra set-up costs may also apply, including acquiring the right licencing and undertaking renovations to ensure any shared student accommodation meets legal requirements.
- While many student cities may offer landlords a steady stream of tenants, properties are unlikely to be occupied from June to September, and tenants may pay no rent or reduced rent depending on the market. As such, investors should also consider their own financial circumstances and how they could manage any short-term void periods.
- Landlords should be aware that student tenants have limited budgets and may not be able to pay full rent at all times.
- Managing a property with multiple tenants can be more complex and time-consuming than managing a single-let property.
Key Student Property Investment Considerations
Invest in the Right Type of Student Accommodation
When investing in a student property in the UK, generally investors have two options – Houses of Multiple Occupancy (HMOs) and Purpose-Built University Student Accommodations (PBSA).
In their second and third years, it’s common for students to move away from halls of residence and into HMOs. Students in HMOs generally want to share with several friends and properties with between 3 and 6 bedrooms are most popular.
In certain areas, landlords will need to acquire a HMO licence, which generally lasts for five years. Landlords may also bear additional legal responsibilities compared to other property types, including additional fire safety measures, annual gas safety checks, electric checks every five years and ensuring that the property is not overcrowded.
If you’re interested in learning more about the insurance & licences you need as a landlord, this article is for you.
While HMO’s remain popular in student cities across the UK, the last half-decade has seen a shift in student demand. Many more students are looking towards private flats and halls of residence located in the centre of university cities for the attractive lifestyle offering. Students are willing to pay a premium for this type of accommodation, which can make this class of student rental a good investment with strong yields.
As a matter of fact, HMOs are considered quite outdated nowadays, as students seem to be more drawn to higher-quality PBSAs which offer better facilities in central locations.
Offer Good Quality Accommodation
Today’s students are becoming increasingly discerning in the types of accommodation they seek out. At the same time, private investors face increasing competition in certain areas from purpose-built student accommodation blocks and student-focused developments. It’s essential that student landlords offer a good standard of property and choose housing with well-appointed communal living areas and ample kitchen and bathroom space to get a higher quality of tenants and better yields.
In addition, it is also important to ensure that the property is well-maintained and in good condition. This includes regular maintenance and repairs, as well as making sure that all safety regulations are met. Also, small touches can make a big difference in terms of tenant satisfaction and help attract high-quality tenants who are willing to pay higher rental rates.
Target Higher-Net Student Demographics
The key to higher yields for student property investors is to target specific student sectors. For example, international students tend to pay more for accommodation and investors would do well to consider universities that attract a high number of foreign students.
As a matter of fact, UK universities have experienced a 17.1% growth in applications from foreign students, namely from non-EU countries like the US (60% increase) and China, both of which are more likely to opt for a PBSA.
Postgraduate students also tend to pay more and seek accommodation away from traditional student areas or housing more suitable for partners and families, which is often in short supply.
Purchase a Student Property at the Right Time
With the university year starting in September, most students begin their hunt for accommodation close to one year in advance. Investors should try to ensure their property is available to let when students are looking to move in based on the academic term to avoid vacant accommodation over long periods.
How did the Pandemic Impact Student Property Investment?
The Coronavirus pandemic presented a year of uncertainty and upheaval not only for the property market, but for higher education. The student housing sectors were hit by the pandemic as campuses closed and many students returned home during national lockdowns.
While investors need to keep the legacy of the pandemic on the student accommodation sector in mind, the university experience is about more than just getting a degree. For most students, the appeal of moving away from home for the first time, the social and community aspects that cannot happen virtually are a huge part of the appeal, and we still think student housing is a great investment that, on the whole, remained resilient throughout the Covid-19 pandemic.
As data shows, student property investment went through the roof in 2020! Property Investors spent an astonishing £5.77 billion in the PBSA sector, according to Savills. This goes to show that property investors consider student property as a lucrative, long-term investment.
What are the Best Places to Invest in Student Accommodation in the UK?
Bristol & Student Accommodation
Bristol University is a top 10 UK university popular with national and international students. The city’s main universities, the University of Bristol and University of West England Bristol, are home to over 56,000 students as of 2021 – an increase of 18% in the last five years. In addition, the surrounding area is home to the University of Bath and Bath Spa, putting a large number of students in the catchment area.
The good news for property investors is that this thriving university town is currently experiencing a shortfall of university beds with an additional 6,400 needed by 2028. Now is a good time for investors to consider a student investment property in Bristol.
Manchester & Student Accommodation
This northern city is home to five of the UK’s leading higher education institutions and the University of Manchester ranks in the global top 30 in the QS World University rankings and attracts students from all over the world. Demand for student properties currently exceeds supply, and with so many international students, there is a good opportunity for high yields in more luxury-end students accommodation which can deliver higher returns to investors.
Leeds & Student Accommodation
Home to one of the UK’s most popular universities, Leeds presents a good investment opportunity for buy-to-let student property. The University of Leeds welcomes over 9,000 international students each year, and with the largest cluster of higher education institutions outside London, each year the Leeds City Region’s 9 universities produce 38,900 graduates.
With the city’s development and popularity, rental costs for student accommodation are increasing and a student property in Leeds can make a good investment.
Birmingham & Student Accommodation
As the UK’s second-largest student city, Birmingham is home to five universities – Aston, Birmingham City, the University of Birmingham, University College Birmingham and Newman University College. The student population sits at around 80,000 and with strong lifestyle offerings, it remains a popular location for local and international students, making it a city investors should consider.
Liverpool & Student Accommodation
The buy-to-let student market is thriving in Liverpool, making it a good location for a student property investment and one of the city’s fastest-growing property sectors.
The University of Liverpool, Liverpool John Moores University, Liverpool Hope University and Edge Hill University produce more than 30,000 graduates every year from home and abroad, and there is strong demand for student rental property due to a shortfall in student accommodation which means shared housing remains an attractive investment.
Sheffield & Student Accommodation
This northern university city is home to the University of Sheffield and Sheffield Hallam and a student population of over 63,000. With student property more affordable to purchase than residential property, investing in student property in Sheffield can present opportunities to first-time investors with a lower budget.
Nottingham & Student Accommodation
Home to The University of Nottingham and Nottingham Trent, Nottingham has over 60,000 students in the city. A popular destination for international students, over one-quarter of the student population is from overseas.
Student rental property is in high demand, making targeting the Nottingham student rental market a lucrative investment. With high yields and low vacancy rates, Nottingham is a strong candidate for investors looking to purchase a buy to let property.
Want to know more about these locations, check out our article called Best Student Accommodation Investment Areas in 2022
When considering whether investing in student property is a good investment, there are plenty of factors to consider. But by choosing buy-to-let student accommodation of the right type and in the right location, investors can achieve decent returns. Get in touch to find out more about student property investment opportunities in the UK.