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Student accommodation

Why student accommodation investors should be interested in Cardiff

Author: Gemma

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The strength of demand for student accommodation investment in Cardiff paints an encouraging picture for property investors looking to gain healthy rental yields in the Welsh capital.

Student accommodation investment Cardiff

The UK student accommodation investment sector has gone from strength to strength in recent years, with a steadily expanding student population and consistent capital growth delivering valuable results for investors.

There are many university towns and cities across the country that hold strong appeal for students and investors alike, such as Liverpool, Manchester and Newcastle in the north of England.

Another location that has great potential for future growth and profitability for investors is Cardiff, which is home to three major higher education institutions. One of the key factors in the Welsh capital’s favour is something investors often look for in any target market: reliability of demand from tenants.

Student accommodation investment Cardiff

Strong student appeal

Cardiff has many characteristics that maximise its appeal to students across the UK and overseas, most notably its trio of major higher education institutions: Cardiff University, Cardiff Metropolitan University and the University of South Wales. The city is also home to the Royal Welsh College of Music and Drama.

The biggest of the three main institutions is Cardiff University, which had 25,295 undergraduates and postgraduates in the 2017-18 academic year, more than half of the city’s total student population of 50,470, according to research by Knight Frank. More than a quarter of the university’s students (7,975) are international – an encouraging statistic for investors, since overseas applicants are often willing to pay higher rents to secure well-equipped, secure accommodation close to their campus.

Cardiff University was ranked 32nd in the Times Good University Guide 2020 and is the only Welsh member of the Russell Group of research-led universities.

Average student satisfaction rates at the three major Cardiff universities are 77.8 per cent. Student satisfaction is often about more than educational provisions, of course, and the Welsh capital has a lot to offer in terms of its general culture and lifestyle.

It is home to many bars, restaurants and nightclubs, particularly in the city centre, and perhaps best of all for many young people pursuing their higher education in Cardiff, it’s the most affordable student city in the UK. That’s according to the Student Living Index 2019 from NatWest, which asked 3,604 people studying in 35 destinations how much they spent on food, rent and social expenses.

For investors, student accommodation investment Cardiff will benefit from a steady stream of tenants from three word-class universities.

The student population

According to official UCAS figures, there were 55,105 applications to Cardiff’s higher education institutions by the January 2018 deadline for October 2018 entry, 12,955 of which were accepted.

Data compiled by Knight Frank showed that, during the 2017-18 academic year, the three main institutions accounted for 37,810 of the total 50,470 full-time students in Cardiff.

More than a quarter (26 per cent) of the overall student population were from overseas, which was slightly above the UK national average of 24.9 per cent.

This is clearly a strong market that will deliver robust, reliable demand for purpose-built student accommodation. As is the case in many university cities, need for dedicated housing outweighs supply, so owners of well-equipped, desirable living space are likely to see competition between tenants drive up rental yields.

Demand for rooms

The Knight Frank research provided an overview of the current picture of student accommodation investment Cardiff, with 26 operational private halls of residence providing a total of 7,674 rooms on a direct-let basis. Most of the private-sector accommodation blocks in the city have been completed in the last ten years.

Nine applications are currently in the planning system, offering a total of 3,041 bedrooms. Three schemes, delivering 725 additional rooms, are due to complete in time for the 2020-21 academic year.

Despite this, there remains a clear disparity between available purpose-built housing and student numbers. Universities and direct-let operators currently supply 16,794 bedrooms, but the student population of 37,810 means more than half (56 per cent) of students cannot access purpose-built accommodation in Cardiff. As a result, most live in houses of multiple occupation.

Knight Frank noted that, even if the total current pipeline of consented schemes were completed, delivering more than 3,000 additional rooms, there would still be 17,975 full-time students in Cardiff unable to access purpose-built housing from their university or the private sector.

Aerial view of Cardiff Bay

A growing city and a thriving market

These figures make it clear that there is sufficient tenant demand in the Cardiff student accommodation sector to deliver the reliable rental yields so many investors are looking for.

Furthermore, the Welsh capital as a whole is witnessing some encouraging trends at the moment, with Savills noting recently that the city is “on the verge of a sustained period of growth”. The firm said Cardiff “punches well above its weight”, since it is half the size of the next largest of the nine UK ‘core cities’, Liverpool, but has an economic and cultural influence that “reaches well beyond its boundaries”.

Buyers looking to invest in Cardiff, will also be pleased to know that the city is expected to witness population growth of 25 per cent by 2034, outpacing all other ‘core cities’ in the UK, including London.

Looking at the wider industry picture, UK buy to let student accommodation as a whole has offered many reasons for investors to get excited in recent years. It has steadily evolved from an alternative into a mainstream asset class and delivered consistently strong returns for investors.

Recent research has put the value of UK purpose-built student accommodation at more than £51 billion, second only to North America.

As far as future demand is concerned, current projections suggest that full-time undergraduate numbers will increase by 15 per cent between now and 2030, so investors can feel confident their UK property investment will continue to attract demand and yield rental income for many years to come.

Investing in Cardiff

Cardiff student accommodation investment

Experience Invest’s student accommodation investment Cardiff is coming soon. To find out more about current student accommodation investment for sale, contact Experience Invest or download our UK Student Accommodation Investment Guide.

Alternatively, if you would like to learn more about why now is the time to invest in Cardiff, access Experience Invest’s new Cardiff Location Guide.

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