There are multiple types of property sectors you can invest in, but student accommodation has emerged as the favourite among international investors. With over 2.3 million domestic and overseas students studying in the UK, key university cities such as Manchester, Cardiff, London and Leeds don’t have enough purpose built student accommodation (PBSA) to meet the demands. Across the UK, the amount of students outnumber the amount of PBSA rooms available at a ratio of 3:1.
The Coronavirus pandemic caused a small minority of investors to temporarily reconsider investing in PBSA. However, the market remained strong throughout the UK lockdown, proving those concerns were unfounded.
In June 2020, the amount of students searching online for student accommodation increased by 25% from the same month in 2019. There was also a 9.6% uplift in university applications from non-EU international students for the next academic year.
Our own extensive research into the impact of COVID-19 on the UK student property market shows how PBSA found a way to thrive in the “new normal,” and investors are looking to carry on where they left off.
Putting Coronavirus to one side, you may still be wondering if buying student accommodation is a good investment, especially if you’re new to the world of property investing, or a seasoned investor looking to diversify your portfolio.
In this article, we’ll take you through the benefits that investors enjoy thanks to this highly lucrative asset class.
Quality Accommodation Results in Higher Rental Yields
The last generation of students generally didn’t care too much about their accommodation. As long as they had a bed, a desk, and they were miles away from their parents, run-down halls and poorly designed HMO properties were paradise to students. These days, students want a modern living environment with the touches of luxury they’ve become accustomed to.
This is great news for property investors. PBSA is the solution to modern student living, but there simply is not enough supply in the market, meaning the value of available units has been steadily rising.
In a survey conducted by Knight Frank and UCAS, 97% of students in 2018 and again in 2019 ranked value for money as a significant factor in deciding where to live. In addition to that, most said they would be willing to pay a premium for amenities such as fast wifi, communal hubs and 24-hour security.
With so many students looking for a quality living environment that comes with home comforts, you can make great returns by providing them with what they’re asking for, making student accommodation a strong investment.
PBSA Helps Students With Social Interaction & Mental Wellbeing
Purpose built student accommodation is outperforming standard student living in every way, and this is highly apparent when you consider the happiness of students.
University can be a lonely time for many, especially international students who don’t have any family in the country or are struggling with a new language and culture. PBSA is built and managed with health and wellbeing in mind, ensuring every student has somewhere they can go to form friendships and develop close connections.
According to a separate report from Knight Frank and UCAS, 81% of students ranked organisations and clubs as very important in reducing loneliness and isolation. One of the reasons PBSA has become so popular is due to on-site staff doing their best to improve student morale by arranging events and activities.
Thanks to the reputation PBSA has gained as an environment where students can have fun and socialise, the concept has grown in popularity. And the more popular it becomes, the greater the demand for this asset class will grow.
The Long-Term Potential
Student accommodation is an excellent investment because there will always be students in need of a suitable and affordable place to live. The student population is growing at an incredible rate, and it’s predicted there will be an additional 135,000 students studying in UK universities by 2030, showing how essential PBSA is to the country.
It’s also worth noting the long-term potential of each individual student. An average university course in the UK runs for three years, which can provide investors with long-term tenants as long as the students remain happy in your accommodation.
No other residential property type can provide the same level of tenant longevity as PBSA. When you consider how many students also go on to study for a Masters degree, you could retain a large number of your tenants for up to six years, guaranteeing you consistent rental income.
PBSA is an Ideal Hands-Off Investment
Your time is valuable, so it’s understandable that you want to make a good investment that requires little input on your part. One of the most positive aspects about PBSA is that you can leave the day-to-day operations with a management team.
Despite being based in a different country, you can be confident that your investment will be looked after by professionals in the student accommodation market. The student management team will tend to the students, tackle any potential problems and provide you with regular updates. With a hands-off investment, you can focus on making a profit, as opposed to running a time-consuming project.
This also allows you to build up a portfolio. Instead of spending your time managing investments, you can allocate that time into finding other opportunities, which can lead to a greater income.
Is Buying Student Accommodation a Good Investment?
Investing in the PBSA sector makes perfect sense. As long as you provide students with quality amenities and a safe place to socialise, you’re giving them everything they need to enjoy their stay at university. In turn, this can lead rental longevity, providing you with years of secured income, without the hassle. A true hands off investment.
We hope this article has given you further confidence and insight into this lucrative sector. Make sure to read our ultimate guide to student property investments for more information on how to succeed in the PBSA market.
If you would like to discuss what student investments are available on the market, you can contact a member of the Treo Investments team for more details.