Three things to consider when investing in student accommodation
- 16 Apr 2019
- In the press
Investing in student accommodation
The world of student accommodation is changing. The days of tired, dated flats that were as nicely furnished as they were spacious (i.e. not very) are gone. Today students live in far more comfortable and salubrious surroundings – in fact, they expect as much.
A recent study by UCAS and Knight Frank shed some light on the matter. It found that as of the 2018/19 academic year, 30 per cent of full-time first-year students across the UK live in private, purpose-built student accommodation (PBSA). This represents a rise of 8 per cent on figures from five years ago.
Of those living in this type of accommodation, a massive 76 per cent said they were happy with their living arrangements. Clearly standards are improving.
Yet it’s not just the quality of student accommodation that has changed over recent years; this has also become an increasingly popular market for both domestic and foreign investors. A survey commissioned by Experience Invest earlier this year revealed that some 24 per cent of real estate investors are currently considering student property for their next investment.
According to Knight Frank, the cumulative value of investment in UK PBSA is estimated to have reached £4.5 billion in 2018, marking an increase of more than 10% from the previous 12 months.
But what should investors be considering when looking for a PBSA investment? Our Business Development and Acquisitions Director, Jerald Solis, has recently written pieces for Property Secrets and Property Reporter offering some insight on this important question – and below we’ve provided a summary of his key points…
Areas of high demand
When thinking about any form of buy-to-let investment, choosing an area that has high demand is key; this will improve an investor’s chances of filling the property and achieving a good yield.
Across the UK, there are 2.3 million people studying at university. The vast majority (76 per cent) are undergraduates and, as we’ve established, around a third of these live in privately-owned PBSA. Simply put, there is a sizeable population of potential renters across the country, but an investor must still choose the best city or town.
Places like Liverpool and Newcastle – where investors can currently find opportunities such as Opto Student Newcastle – are what Knight Frank classes as mature markets, or “strategic cities containing dual or multiple well-regarded universities, and large numbers of students”.
Cities likes these boast high levels of demand and should feature prominently on an investor’s list when considering a PBSA investment.
As we referenced at the start, the quality of PBSA is becoming more and more important. Students expect a higher quality of living than in years gone by, so investors should be looking for developments equipped with a modern finish and excellent facilities.
The aforementioned UCAS/Knight Frank study offers some more useful information. In terms of key factors when choosing where to live, location came out on top, cited by 79 per cent of respondents, followed by the ability to live with others (76 per cent), the number of bedrooms (73 per cent) and the quality of the accommodation (67 per cent).
Make sure these factors inform the property search.
Knight Frank states that approximately 29,000 purpose-built student bedrooms are due to be delivered across the UK by the start of the upcoming 2019/20 academic year – a 25 per cent year-on-year increase. Furthermore, an additional 14,000 bedrooms are currently under construction or in planning for delivery in the 2020 and 2021 academic years, with these numbers likely to rise.
Clearly, the PBSA pipeline is strong and this means there are exciting new opportunities for off-plan investments.
The fundamentals remain key: investors must choose a development in a great location and with a high-quality finish assured. But going off-plan will not only present the chance of a discount on the value of the property; it can also deliver returns during the construction period.
To find out more about current opportunities and investing in student accommodation, contact Experience Invest.