Is now the time to invest in student accommodation? - 24/02/23

Investing in student housing has become one of the most popular asset classes in the UK in recent years. There are a growing number of opportunities to invest in student housing in the UK as a result of the country's student population continuing to grow at an exponential rate.

Student property has the potential to deliver stable long-term income, and many investors view it as the best method to diversify their portfolios, whilst safeguarding their capital from inflation and economic turbulence.

Despite the UK experiencing some challenging market conditions towards the end of 2022, investors continue to be optimistic about expanding their portfolios now the mortgage market has started to see a decline in interest rates.

We have certainly learned over the last few years that despite ominous predictions across the globe, notably during the covid pandemic, property continues to ride the waves in the most predictable manner. Student property goes that one step further, with its target demographic continually growing annually. Further education today has become even more essential for those looking to reach the pinnacle of their chosen industries.

According to Savills' most recent market analysis, "UK purpose-built student accommodation (PBSA) has continued to demonstrate that it is counter-cyclical, with rise in student numbers during a period of economic instability. The demand for domestic students is at an all-time high, while the supply of housing in the private rental sector (PRS), like HMOs, is limited and declining.”

According to the most recent UCAS application data, both domestic and high-value international student populations are growing, and more are looking for hands-off, well-presented property. Depending on your investment plan and the goals you have for your money, you may want to consider investing in student housing.

Renting out student housing is extremely reliable because tenants typically sign leases at the start of the academic year. If you invest in the correct regions, you can expect to see significant demand. Helping the sector further, the government has now lifted the limit on the number of students a university can enrol, and many students are now having trouble getting any kind of housing in some of the more well-known regions likeManchester, Liverpool and Bradford.

In addition to stable tenancy rates, yields—the amount of rent you can collect on a monthly or annual basis relative to the value of the property—tend to be greater than they are for typical residential investments.

It’s clear that if investors are looking for property that offers a lower entry level, whilst delivering a strong return, PBSA is certainly worth looking at. Northern university cites are most likely to deliver the most stable returns, and with a small number of developers operating in this sector, it’s important to speak to them before any pre-launch to secure the best living spaces.