Investing in Student Accommodation: The Essentials17 07 2018
If you’re thinking about investing in student accommodation, you’re onto a good thing. With two students for every one purpose-built bed space in the UK, there’s plenty of opportunity in this property investment sector and this level of demand is not set to fall anytime soon.
But before you begin the investment journey, it’s important to equip yourself with the essentials.
The more knowledge you have of the market, the better you will be able to identify key opportunities in the right context and be savvy with your investment choices.
The Benefits of Student Accommodation Investment
First, we should consider the benefits of such an investment. Whether it’s student houses or purpose-built accommodation (PBSA), the right student accommodation investment can offer guaranteed initial rental yields with the added potential option of a management team to oversee the day-to-day admin.
It’s one of the fastest growing asset classes for institutional investors seeking high yield property with low-interest rates where demand is consistently far outstripping supply.
The exceptional quality of UK higher education at world-class universities is drawing local, national and international students to the nation, and pushing demand to a peak. Taking just one example of the city of Newcastle (home to Newcastle University and the University of Northumbria), there are more than 43,000 students but just 8,365 beds available.
PBSA is certainly showing promise. Knight Frank’s Student Property Index examined PBSA rents across 75 cities and found that rents went up steadily by 2.55% for the 2017/18 academic year, with 95% of the cities reporting rental growth.
Investments are being made into university infrastructure at a rapid pace in a bid to keep up with the demand, which is only set to increase once again when the results of such multi-million pounds investments come to fruition.
Just this week, the University Partnerships Programme agreed to a £41.4m deal to deliver 382 new student residences for the University of Exeter. Over in Newcastle, IP Investment Management (IPIM) and The Mansion Group have purchased a 386-bed purpose built student accommodation block for £19.5m.
With such a range of new PBSA developments, many of which are high-density schemes, any investor is bound to enjoy huge demand for student property and highly attractive rental yields.
This is especially true in those locations with a typically more affluent student population where parents can afford the highest quality accommodation. As more and more people are being accepted into university and the number of international students continues to rise, the opportunities in this investment sector only become more lucrative.
Where to Invest?
Location is absolutely key when choosing your investment. The two most important factors should be university towns where there is a shortage of accommodation and student numbers are thriving.
While Portsmouth, Swansea and Brighton are showing some of the highest supply to demand ratios on record, Newcastle, Liverpool and Leeds are also frontrunners thanks to the extensive infrastructure improvements, and the consistent capital flow being invested in order to improve the cities further and make them even more attractive to students.
We must also not forget the core locations such as Manchester and Edinburgh that are home to consistently top-ranking universities and thriving student populations.
While there are many benefits to investing in PBSA, it is important to be aware of the tax provisions, any potential risk and other finer details to ascertain whether it is the right type of property investment for you.
Whether you prefer, for example, capital income or growth-focused investments, commercial or buy to let mortgages are all key factors that will influence your decision.
It’s also important to know what type of features to look for in your student accommodation investment. As the student population becomes more and more stringent with their requirements, you must adopt a forward-thinking and holistic approach to the investment. This will help you to choose an accommodation that meets all of their needs and expectations from facilities to support.
And if that all sounds a little too challenging, don’t fear! That’s exactly what our team at Alesco are here for.
Our professional, knowledgeable team will offer informed guidance and unique market insights to identify the most lucrative opportunities available to fit with your budget and your desires.
We provide access to market-leading products with the aim to minimise risk and maximise returns. For further advice and support on student accommodation investment, please contact us directly on 0203 281 7433 or drop an email to firstname.lastname@example.org