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Insight & Opinion

Alternative property investment – what are the UK’s most attractive sectors?

Author: Gemma





Alternative investments, UK

UK property has gained a reputation as a ‘safe-haven’ investment, having delivered consistent returns for asset owners and demonstrated resilience to various challenges and economic headwinds over the years.

Britain’s impending departure from the European Union is causing political and economic uncertainty in the UK and on the continent, but property remains a highly popular and potentially lucrative investment option. This is particularly true for overseas investors, who have benefited from the recent decline in the value of sterling on international currency markets.

The best alternative investments for 2019

For those looking for a route into UK real estate that offers unique benefits over mainstream assets, alternative property investment could be the ideal option. Here, Experience Invest highlights three sub-sectors of the property market that are set to attract a lot of attention in 2019…

Student accommodation

Purpose-built student accommodation has become an increasingly attractive and lucrative asset class for investors in recent years. One of the most compelling aspects of this segment for buyers is the reliability of tenant demand, with UK universities and colleges continuing to prove popular among students from across Britain and overseas.

Steady demand means consistent, healthy rental yields for property owners and a low risk of void periods.

The latest figures from UCAS suggest that the appeal of British higher education institutions is as strong as ever. A total of 561,420 people made applications to start a college or university course in 2019, nearly 2,500 more than a year earlier.

Applications from outside the EU increased by nine per cent to a record high of 63,690, while EU applicant numbers also rose by one per cent to 43,890, suggesting that Brexit has not dampened international demand to study in the UK.

Knight Frank said the figures “reaffirm the global appeal of UK higher education”, Letting Agent Today reported. Neil Armstrong, student partner at the agency, commented: “The global appetite for investment in UK student property has never been higher and will be further bolstered by this year’s applications.”

Furthermore, recent research from Knight Frank indicated that ‘specialist assets’ such as student accommodation are currently seen as the most attractive investment class. Nearly four out of ten investors (37 per cent) identified these assets as their primary target with a three to five-year hold.

The study also revealed that European real estate investors see the UK as their preferred investment destination for 2019.

Chris Bell, managing director for Europe at Knight Frank, said: “The emergence of the UK as the European market of choice in 2019 is interesting, suggesting many think that pricing looks attractive.”

Regardless of Brexit-related uncertainty, it seems that UK property, and student accommodation in particular, will continue to attract investor interest in 2019.

Experience Invest is currently offering attractive opportunities in the student housing sector, such as Opto Student Cardiff.

UK hotel sector

Hotel rooms

Much like student accommodation, UK hotel units are an attractive option for investors thanks to the reliability of demand for rooms.

Several factors could fuel ongoing demand in 2019, including the weakness of the pound against other international currencies, which will encourage overseas travellers to visit the UK and take full advantage of their spending power.

The business travel market is also a key source of demand for hotel rooms. While it’s possible that Brexit-related uncertainty could have an impact in this area, there have been positive forecasts for the coming year, particularly in the meetings and events segment.

According to the Meetings Industry Association, this sector is “looking towards 2019 with optimism”. The number of meetings held in the UK between June and August 2018 was 49 per cent higher than during the same period in 2017.

MIA chief executive Jane Longhurst said: “It is encouraging to hear that most participating members are enjoying strong demand and are continuing to receive enquiries for 2019, particularly as forecasts for the UK economy are very cautious.”

Real estate services firm JLL took a similarly positive tone with regards to hotel investment in its Hotel Investment Outlook for 2019, noting that trends in the market have “defied global caution”.

Focusing on Europe and the UK, the report said political uncertainty could “continue to distract investors, but tourism and business fundamentals remain solid thanks to strong infrastructure developments in the region”.

“Therefore, we expect to see investors still seeking strong assets and opportunities in these markets,” it added.

Off-plan property

Off-plan property investment is proving an increasingly attractive option for many buyers and landlords in the UK. The key reason for this is that this segment of the market offers strong yield potential, as investors who commit to a property while it is still in development can secure a low price.

In areas where capital growth trends are strong – such as Liverpool and Manchester, which have helped to drive positive market trends in the north of England in recent years – the ability to break into the market at a low entry price can be extremely valuable.

Off-plan developments are often earmarked for the build-to-rent sector, meaning investors can expect to receive strong demand for the property when it arrives on the private rental market, with regular returns assured over a particular period of time on some developments.

The British Property Federation (BPF) recently highlighted the growth of the build-to-rent market. There were 43,374 high-quality, professionally managed homes aimed specifically at renters under construction in Q4 2018, 39 per cent more than a year earlier.

BPF director of real estate policy Ian Fletcher said: “With the revised National Planning Policy Framework asking local authorities to identify how many new rental homes their respective areas need, the future should remain bright for build-to-rent.”

This positive outlook bodes well for off-plan property investment, as buyers can commit to assets early on to get the lowest possible price, and feel confident that the development will attract a lot of interest from tenants as it approaches completion.

With barriers to buying still high in the UK, and demand for rental property set to stay strong in the coming years, off-plan developments could prove particularly appealing for buyers searching for a combination of long-term capital growth and regular yields.

Follow Experience Invest on Twitter for more information about student accommodation, off-plan property and hotel room investment in the UK.

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