Student Accommodation Leeds: What you Need to Know as an Investor
Leeds, a bustling northern city in the UK, is not just a cultural and historical hub but also a popular educational centre. Home to renowned universities like the University of Leeds, Leeds Beckett University, and several specialist colleges, it attracts a vast and diverse student population.
This influx of students underpins a thriving market for student accommodation Leeds. With student numbers set to rise, strong demand for quality student accommodation is driving a growing rental market.
In this article, we take a look at student accommodation Leeds, the current state of student accommodation, predictions for the future and what makes investing in student property advantageous for investors.
The Student Demographic in Leeds
Leeds is home to several prestigious higher education institutions, making it a vibrant educational hub. Leeds’ universities collectively enrol tens of thousands of students, a number that has shown a steady upward trajectory.
Key universities in Leeds include the following:
- University of Leeds
- Leeds Beckett University
- Leeds Trinity University
- Leeds Arts
- Leeds Conservatoire
As of the 2022/2023 academic year, the University of Leeds reported an enrollment of over 38,000 students, with an annual intake steadily increasing over the past few years.
Leeds Beckett University also reports a significant student population in the 2022 – 2023 academic year, with numbers around 29,000. Leeds Trinity has around 9,575 students, Leeds Arts 2,245 and Leeds Conservatoire, the music and performing arts school, welcomed around 1,500 students this academic year.
Student Accommodation Leeds: Student Trends
Over the last five years, universities in Leeds have generally seen a trend of increasing student enrollment. External factors, such as changes in government education policies, tuition fees, and international events (like the COVID-19 pandemic), have also influenced these trends and student numbers have fluctuated over this period due to travel restrictions and rising fees.
- Student Numbers Set to Rise
Recent statistics from UCAS for the 2022/23 academic year indicate a significant influx of over 560,000 new undergraduate students into UK universities.
As one of the largest universities in the city, the University of Leeds has consistently reported growth in its student population. This increase reflects its expanding course offerings and reputation as a leading research and teaching institution.
Specialised institutions like Leeds Arts University and Leeds Conservatoire have also shown growth while having smaller overall numbers. This growth can be attributed to the increasing popularity of specialised courses and the institutions’ reputations in their respective fields.
Based on current trends, Knight Frank predicts a 16% rise in student numbers by 2030, an increase of approximately 263,000 full-time undergraduates. UCAS anticipates that annual university applications in the UK could reach one million by the end of the decade.
- International Student Trends in Leeds
According to 2021-2022 statistics from the Higher Education Statistics Agency (HESA), there are currently 679,970 international students pursuing degrees in the UK. A significant proportion of students in Leeds are from abroad, reflecting the city’s global appeal.
The University of Leeds welcomes more than 14,000 international students from 137 countries. With around 27% of its students coming from abroad, its campus is among the most diverse and multicultural in the UK.
Highlighting the global appeal of UK higher education, there’s an expected 60% surge in international student applications, with 75% of this coming from non-EU countries by the end of the decade.
For landlords, this diversity translates to a continuous and varied demand for student housing, ranging from on-campus dorms to private rentals.
Types of Student Accommodation in Leeds
Leeds student accommodation options reflect its student population’s varying needs and preferences. For property investors considering student accommodation Leeds, understanding the various types of housing available is crucial. Each category appeals to different segments of the student population and offers distinct investment characteristics.
- Halls of Residence
Traditional dormitories or halls are often situated on or adjacent to university campuses. Due to their consistent demand, they represent a stable investment opportunity. Halls are favoured by first-year students and those preferring an all-inclusive living arrangement.
Student halls can be a potentially lucrative option for investors seeking to cater to a steady stream of new students each academic year. The built-in management structure of dormitories also simplifies operational aspects for investors.
- Shared Houses or ‘House in Multiple Occupation’ (HMO)
HMOs, where multiple students share a house but rent individual rooms, are a popular choice of Leeds student property. For investors, HMOs can offer higher rental yields compared to single-tenancy properties, as rent is charged per room. However, investors must be mindful of additional regulatory requirements and the higher turnover rates typical of shared housing.
- Private Student Residences
Private student residences, which are purpose-built accommodations managed by private companies, are an emerging trend in student housing. These residences often offer amenities similar to traditional dormitories but with added luxury and privacy.
For investors, student property Leeds can be attractive due to its potential for higher rental income and appeal to international students who might prefer more upscale living conditions.
- Studio Apartments
Studio apartments combine a kitchen, living area and bedroom in one self-contained unit. They particularly appeal to postgraduate students or those who prioritise privacy and independence.
Investors might find studio student flats Leeds a lucrative niche, as they often attract a more stable, mature student demographic and can command higher rents compared to shared accommodation options.
Student Property Investment Leeds: Regulations and Licencing
Landlords and investors in the UK’s student housing market must understand and adhere to regulations and licensing requirements.
Investors must obtain proper licenses, especially for Houses in Multiple Occupation (HMO), and understand the specific safety regulations for student accommodations and the various local council requirements and guidelines.
Staying compliant not only ensures the safety and well-being of tenants but also safeguards the landlord’s investment from legal complications and fines.
Licensing for HMO Properties
In the UK, landlords looking to invest in Houses in Multiple Occupation (HMO) must understand licensing requirements. An HMO is defined as a property rented out by at least 3 people who are not from one ‘household’ but share facilities like the bathroom and kitchen.
Large HMOs, defined as properties rented to 5 or more people forming more than 1 household, require a mandatory HMO license from the local council. This license, which must be renewed every 5 years, ensures that the property is suitable for the number of occupants and meets safety standards.
- Safety Regulations for Student Accommodations
Safety is paramount in student accommodations, and UK laws enforce stringent regulations to ensure tenant well-being. Key safety requirements include:
- Gas Safety: Annual gas safety checks by a registered engineer.
- Electrical Safety: Electrical installations must be inspected and tested by a qualified person every 5 years.
- Fire Safety: Adequate fire safety measures, like smoke and carbon monoxide alarms on every floor.
- Local Council Requirements and Guidelines:
- Local councils in the UK have specific requirements and guidelines that landlords must adhere to. These can include:
- Planning permission: Some councils require permission to convert a property into an HMO.
- Waste management: Guidelines on waste disposal and collection are especially relevant in student accommodations with high turnover rates.
Current State of the Student Housing Market in Leeds (2023)
The rental market in Leeds has seen a steady increase in recent years. According to Unipol, in 2022, the average rent for standard student off-street HMO shared houses across Leeds is £93.02 per week excluding bills, increasing to £115.27, including bills. This is a 15.67% increase in average rent since 2018.
Knight Frank’s research highlights that Leeds led the way in new student accommodation, delivering 2,328 beds, surpassing Bristol, which delivered 1,346. The private sector is at the forefront of this expansion, contributing 72% of these new accommodations.
However, the addition of new beds in 2023 was 28% less than the previous year. Factors such as increased construction and land costs, shortages in skilled labour, rising financing expenses and complex planning policies have played a significant role in decelerating the pace of development. This slowdown occurs in the face of a steady increase in the student population, making it a competitive student rental market.
Student Accommodation Leeds: Trends Impacting the Student Market
When looking for student investment property Leeds, landlords should be aware of several key trends impacting the market:
- Properties Closer to Campus Command Higher Rates
Properties located near universities in Leeds tend to attract higher rental rates, making them lucrative investments for landlords interested in student housing. Given the consistent demand from students seeking accommodation near campus, these properties offer a steady income stream and often experience lower vacancy rates.
Hyde Park and Woodhouse remain the city’s most desirable areas, largely due to their proximity to the main university campuses and the city centre. The train station in Burley also adds to its appeal, making it a popular choice among residents. In recent times, Headingley, formerly known as the traditional hub for students, is now primarily favoured by final-year students.
- Rising Student Numbers
According to money.co.uk, Leeds had the most student properties in 2022, with 16,225 homes. Nottingham was close behind with 15,422 properties, and Birmingham had 14,829 properties.
Data from student housing charity Unipol also reveals a 30% year-on-year increase in graduate students staying in Leeds. With many continuing to live in the same areas, thousands more people are competing for rental stock, which is good news for landlords.
There is a pressing need to increase supply to meet the expected growth in demand. Currently, the UK’s pipeline for student accommodation stands at approximately 132,490 beds. Of this total, 22% are already under construction, while another 44% have received full planning approval. London leads in this expansion, with the largest number of beds in the pipeline, followed by cities like Nottingham, Leeds, Bristol and Birmingham.
- All-Inclusive Appeal
As energy prices rise sharply, students increasingly seek all-inclusive rental properties that bundle utilities such as electricity, gas, internet, water and TV licensing into their monthly rent.
For many students, renting a property without included utilities now appears too uncertain, with a significant 72% expecting their rent to cover all these essential services. This shift towards all-inclusive accommodations reflects a growing preference among the student population for simplified and predictable living expenses.
- Demand for Smaller Properties
In recent years, there’s been a noticeable trend in Leeds towards properties with fewer bedrooms. Properties with two or three bedrooms are especially in demand, while larger homes with six to eight bedrooms now need exceptional marketing strategies to justify their higher rental prices.
Many landlords in Leeds adapt to this change by converting larger properties into dual apartments or transforming smaller bedrooms into en-suite bathrooms to meet renters’ evolving preferences.
- Inflation and impact of student Housing
This year, inflation has significantly affected construction and operational expenses. According to the Building Cost Information Service (BCIS), construction expenses rose by 8.7% in 2022, driven by a 10.9% increase in material costs and nearly a 5% rise in labour costs.
The higher cost of borrowing has added to the challenges faced by investors. These economic conditions have made it more difficult to initiate or finance new student housing projects. However, there are indications that the inflation in building costs is starting to ease, signalling a potential market shift as the inflation of input costs and demand pressures decrease. This trend is expected to improve project feasibility and motivate investors to pursue new Purpose-Built Student Accommodation (PBSA) developments.
- Lack of Rental Supply Supply
At a time when student numbers are on the rise and the delivery of Purpose-Built Student Accommodation (PBSA) is lagging, the broader private rental sector is experiencing a significant supply crunch.
A recent survey, conducted in collaboration with UCAS and involving over 20,000 students, revealed that less than 70% of first-time university applicants this year felt there were sufficient accommodation choices in their selected cities. This shortage is exacerbated by the fact that many students are competing for limited options.
Furthermore, data analysis from Rightmove indicates a decline in the availability of rental homes across the UK. Specifically, the number of properties listed for rent in the second quarter of 2023 was 52% lower than the average during the pre-pandemic years of 2017-2019. This scarcity in the rental market is leading to supply shortages for students while simultaneously supporting occupancy rates and lease completions for PBSA schemes.
This situation presents landlords with a significant opportunity. The growing demand for student accommodation and the limited supply means landlords can expect higher occupancy rates and potentially increased rental yields. For landlords in university cities like Leeds, investing in or adapting properties to cater to the student market could be a particularly profitable strategy.
- Boosted Rents
The rental market has grown substantially, averaging 5% in 2022/23 and expected to increase 6% to 7% in 2023/24. This trend varies across different markets, depending on supply and demand imbalances. Unite, a major PBSA player, forecasts 7% rental growth and full occupancy for the next academic year, with higher gains in areas facing the most acute shortages.
For landlords, this means a promising outlook in the student accommodation sector. The consistent rental growth across many locations suggests a profitable environment, particularly in regions with significant supply-demand gaps. The forecasted growth for the upcoming year reinforces the potential for higher yields and occupancy rates in student housing investments.
Is Investing in Student Accommodation a Good Idea?
As universities continue to attract domestic and international students, the demand for student housing presents a unique opportunity for investors.
Here are the main benefits of investing in student accommodation:
- High demand due to growing student population
The UK’s student population is consistently increasing, creating a constant need for student housing. This sustained demand makes investing in student accommodations a stable and attractive opportunity.
- Potential for steady rental income
Student accommodations offer a unique advantage of cyclical and reliable rental income, driven by the regular influx of students every academic year. This aspect ensures a continual cash flow, making it a financially appealing investment.
- Resilience of the student housing market
The student housing sector often outperforms other real estate markets. Even in challenging economic times, its stability provides investors with a more secure and less volatile investment option.
How Profitable is Student Accommodation?
Record-high student numbers are driving the demand for PBSA and outpacing the available beds supply. This high demand relative to supply is resulting in strong rental growth prospects for the sector. Occupancy for the 2022/23 academic year for student lettings Leeds is at record levels, and the same is expected for 2023/24.
The UK’s growing student population, underpinned by demographic trends and a rise in international students, contributes to sustained demand. The weakening pound makes studying in the UK more attractive, offsetting any decrease in EU students. All these factors indicate that student accommodation in the UK can be profitable for inventors.
Student accommodation Leeds presents a compelling opportunity for landlords. With rising student numbers and constrained supply in the private rental sector, landlords are well-positioned to capitalise on the increasing demand.
The strong growth in rental rates, coupled with the anticipated expansion in student populations, suggests a robust and profitable investment in the long term. Landlords who adapt to market trends and meet the evolving needs of student renters can expect high occupancy rates and potentially lucrative returns on their investments in student accommodation Leeds.
To find out more about investing in student accommodation in Leeds or beyond. Get in touch with our property experts.