A student property investment in the UK is widely considered one of the safest investments you can make. There are over 2.3 million students in the UK across 131 universities, but there currently isn’t enough supply to meet demands. It is estimated that students outnumber PBSA units at a ratio of 3:1, meaning there is a huge undersupply for this type of student property.
The interest in this sector is staggering, and the UK is grateful for the input that comes from international investors. North American, Gulf Cooperation Council and Asian investors make up the bulk of investment in the UK PBSA market. Out of the £2.9 billion invested in UK PBSA in 2018, £1.68 billion came from overseas. Singapore Press Holdings (SPH) alone have a UK-based student property investment portfolio worth over £448 million.
The student market has a lot to offer investors due to the hands off nature of the investment. As the sector is one of our many key areas of interest, we put together this guide to help you understand more about the student property investment market.
What Types of Property are Available?
Historically, there were only two options available to students: Halls of Residence and Houses of Multiple Occupancy (HMOs). Neither of these options offered students the space or facilities that we see in Purpose Built Student Accommodation (PBSA) . In recent years, developers have been building accommodation with student health and wellbeing in mind.
The standard — dependent on budget — offers students fully self-contained studios or one-bed apartments, including a kitchen and bathroom while integrating technology to enhance student experience. Facilities on-site may also include social spaces such as cinemas, gymnasiums and study lounges.
Where are the Best Locations?
Knowing the best cities to invest in is crucial to a successful student property investment. Many places in the UK are known for their prestigious universities and large student populations. Generally speaking, these are the areas you want to focus on. If you’re unfamiliar with the UK property market, it’s important to take the knowledge from experienced consultants to find the right location to invest in.
Take London as an example. It has more universities than any other city in the world and a student population of 400,000, which is the largest in the UK. It may seem as though London has all the makings of a great city to invest in, but the high cost of property and low rental yields make the region a less attractive proposition for investors in the student market.
The North of England and the Midlands, however, provide excellent alternatives to investing in London property and will be more in line with your expectations of high returns at attractive property prices, which we associate student property with. Take Newcastle-Under-Lyme for example. Studio prices start from a little as £69,999 and can offer up 10% Assured Net Rental Returns over a 3 year period.
Liverpool is another city that has proven popular with property investors. The region has over 70,000 students and has become very popular with international students over recent years. Investors in Liverpool are seeing rental returns as high as 10% in some developments. Property here costs a lot less than in the south of the country, ultimately giving investors a greater return on investment and excellent value for money.
Every city has something different to offer, which is why it is important to do your research.
The Importance of International Students and Their Relatives
The international student market is integral to this sector as 23% of the UK’s student population comes from overseas. There are over 100,000 Chinese students in the UK alone, and there has been a 48% rise in EU students choosing to study in the UK. When investing in student property, it is important to keep these demographics in mind.
In many cases, international students do not pay for their own accommodation; it is a relative (usually a parent) who pays, so you need to make sure your property satisfies and gives the peace of mind they are looking for when sending their children to a different country to study.
Parents base their decision on four factors when choosing accommodation for their children. They are:
- High quality living conditions
- Safety & security
- Value for money
- A strong learning environment
By meeting these needs, you increase the chances of a parent agreeing for their child to be accommodated in your property.
However, you need to remember domestic students account for 40% of all residents in PBSA properties, so it is important not to overlook them.
As with international students, many parents will be helping domestic students pay for accommodation. Once the parent approves and the student moves in, you have to ensure the property meets their needs so they stay for the duration of their course.
What Do Students Want?
When considering a student investment, you want to know why students will choose your accommodation over another. Students want more than the basics. They want convenience and modern luxury. The most successful student properties in the UK cater to these needs through:
- On-site gyms
- Communal areas & community activities
- Outdoor space (such as a roof terrace)
- High-speed internet
- 24-hour security
- Free bike hire and more
UCAS helps prospective students with their university applications in the UK. They conducted a survey that found students would be willing to pay an extra premium for these services.
As they are at university to study, students require access to libraries, collaborative working spaces and private study areas. This ensures they can get their work done to the best of their ability in the comfort of their own home.
How to Find a Student Property Investment Opportunity in the UK
It is not hard to find a student property investment in the UK, but finding one that will result in success is more of a challenge. At Treo Investments, we have the knowledge, experience and connections in the student market, which allows us to source the best performing developments for you.
We take the time to find out what it is you want from an investment, so you can be sure the opportunities we source will deliver, providing immediate rental returns from day one.
Get in touch with us today to find out how we can help you make the right investment.