Student property has become a popular asset class and has been named by Knight Frank as the UK’s top performing property sector since 2011.
Now an established asset class in its own right, some questions have been raised about the long term performance of the sector by those looking to invest in student accommodation.
We’ve compiled our top frequently asked questions about the student property sector, to help potential investors come to a well-informed investment decision.
Aren’t student numbers declining?
Back in September 2012, universities in England raised their tuition fees to up to £9,000 per year. Previously the cap was set at £3,375 in the 2011/12 academic year.
Initially the rising cost of education had a negative effect on student numbers, with UCAS reporting a 12% decline in the number of applicants. Despite this decline, the UK’s higher educational system is highly oversubscribed and only when the decline of applicants reaches 30%, the system will lack demand. For example, in Sep 2011 there were 700,160 applicants, but only 492,030 were accepted (UCAS).
Regardless of the decline application numbers are almost back on track. In January 2014 UCAS recorded a 4% increase in the number of applicants applying for UK university spaces. A total of 580,000 students applied for the 2014 academic year which is only slightly below the peak of 583,000 recorded back in 2011, where an influx of students applied to avoid the rise in fees.
These figures point to an on-going recovery of applicant numbers in a system which is already highly oversubscribed.
There are enough rooms already built
Many higher educational institutes have increased their intake over the last 20 years however they have not had the funding to provide more purpose-built rooms.
Back in 2012, CBRE reported that most of the private operators of purpose-built halls reported 99%+ occupancy rates. Although new developments have been built across the country, many UK universities are unable to offer university operated accommodation therefore there is ample scope for private developers to provide alternative accommodation.
According to the NUS, around 1.7 million students need accommodation in England and a variety of different forms of housing are needed.
NUS state that the private sector has grown by 35% over the last 10 years (2003-2013), marking a significant rise in student property not operated by universities.
In 2013 CBRE stated that the total investment in UK student accommodation breached £2bn for second consecutive year. This influx of funds surely highlights the demand for investment in this niche property sector.
It is advisable for anyone who is looking to invest in student accommodation to research the area before buying. Investors should check how many student beds are currently available in their chosen location and how many developments are in the pipeline.
Expansion plans for local universities should also be considered as large scale investment tends to lead to rising student numbers.
Students don’t mind dingy digs
The term ‘student accommodation’ used to set alarm bells off for many landlords who typically opted out of letting properties to students. Today, this is not the case, and this point is particularly true for purpose-built accommodation.
NUS believe that, ‘Good quality accommodation is vital: few students can reach their maximum academic potential in poor quality housing.’
With fees now teetering around the £9,000 per year mark, students want to get the best grades to ensure they get the most out of their degree.
Loud, messy shared student houses in need of maintenance are being replaced with high-specification purpose-built developments, which contain studio and en-suite rooms that are arranged in a cluster to share a kitchen.
These student developments offer all the mod-cons of modern day living including WiFi, study spaces, shared games rooms, communal gardens, parking and bike storage, and in some cases state-of-the-art gyms.
More students are opting for better quality housing to ensure that their living environment does not affect their studies.
Students can’t afford high-end accommodation
With average residential rental prices rising at 1.63% per month and demand for property at an all-time high, students are fully aware of their accommodation budget.
Instead of taking rooms in the residential market – which can tend to veer away from student lettings – many students are looking towards a modern, comfortable living space for their years of studying. Due to the cost of higher education, students take their courses and studies seriously, with amenities and comfortable living high on their priority lists.
High specification, purpose-built accommodation tends to be marketed towards international students who are living in the UK for the first time. International students typically have a larger budget for accommodation.
Features such as secure fob lock entry systems, 24 hour CCTV, manned receptions and in some cases private car parking, provides peace of mind for parents of students and the students themselves.
What’s more, the UK is increasingly becoming the education destination of choice. An impressive 61,985 international students were accepted onto courses in 2013/14, marking the highest recorded figure since 2010 (63,895). Rising demand from overseas students for purpose-built student rooms has helped heighten the demand for high specification rooms.
Now that your UK student property investment myths have been busted, isn’t it time to consider the UK’s top performing asset class?