Student property investment used to be the niche asset class in the UK’s real estate market, but ever since 2012, when student numbers started to grow in the post tuition fee era for the first time, we’ve seen the market move into the mainstream at an incredibly fast pace.
For the first time the market hit £2 billion of investment in 2012. This figure was matched in 2013 and 2014. In 2015, the demand from students for high quality accommodation has increased the level of spending, with £4.25 billion invested in the first 9 months of this year alone, over double what it’s ever been before.
The experts at Savills expect that UK student property investment will exceed £5.7 billion for 2015 however, what will the future hold for 2016?
Looking back over 2015, the sector has shown no real sign of slowing down, with investor appetite having been fuelled by a number of positive factors surrounding the UK’s higher education sector.
Student numbers continue to rise and this is expected to be the case throughout 2016. Looking back to the sharp drop recorded when tuition fees were increased, UCAS has posted impressive growth in applicant numbers almost on a yearly basis.
Mid-January will provide the student property market with the first indication of student numbers for the next academic year when the final deadline passes.
However, looking back to October, when applicants numbers were up 1%, it would seem that student numbers could well and truly be on the up again next year.
Rising student numbers will give investors more confidence that demand for purpose-built will remain high, which will only increase the appetite for investment.
The UK’s buy-to-let market is popular with investors as this stock is what people want in a fast-paced modern world however, student property is the most lucrative market. According to Property Forum states that investors in this market can make yields 5% to 6% higher than residential buy-to-let property.
One final point to consider is the continuous rise of international students in the UK which could boost investment next year. For years, cheap HMOs were the choice of investors, but the tides have turned as increasing numbers of international students came into the UK, often with money to spend and a desire to find better quality housing.
To cater to this market, investors may find themselves spending more in the initial stages to get quality stock, which again could increase spending next year.
Only time will tell if 2016 will be as successful as this year, however all the signs point it being another good year for student property investments.