There are many reasons for buyers from the Middle East to consider entering the UK property investment market, such as the strong history of capital growth in Britain and the currently favourable exchange rates.
When it comes to selecting a particular asset class, one option that holds powerful appeal for many investors is student property, which has proven highly lucrative in recent years.
Here are some of the key factors that make investing in student property an attractive prospect:
The number of people attending higher education institutions in the UK is on the rise, fuelling demand for purpose-built student accommodation.
According to figures released by UCAS in April 2018, the proportion of English 18-year-olds making undergraduate applications had increased to 37.8 per cent, the highest level on record.
The number of EU applicants increased by two per cent from a year earlier to 46,040, while applications from other overseas countries rose by eight per cent, hitting a record high of 65,440.
This growth in international demand is a particularly encouraging trend for investors in purpose-built student accommodation, as foreign undergraduates and their families often look for the reassurance of dedicated rooms close to campus.
Clare Marchant, UCAS chief executive, said the figures “show the enduring attraction of a full-time degree for young people, and the desirability of UK higher education to students from around the world”.
Lack of supply
Mirroring a trend seen across the UK property market as a whole, supply of student accommodation is struggling to keep up with demand.
Investors in this asset class can therefore expect a consistent and reliable supply of tenants and, consequently, healthy rental yields.
Knight Frank highlighted this issue in a February 2018 report focusing on Newcastle, which is home to two major higher education institutions: Newcastle University and the University of Northumbria.
According to UCAS, these universities received 62,870 applications for entry in September 2017, an increase of 35 per cent compared to the 46,585 received in 2008.
The supply of accommodation has not kept up with this rate of growth, with Knight Frank noting that Newcastle is home to 43,390 university students but is only able to offer dedicated housing for 8,365 people.
Higher education institutions and private sector schemes combined provide nearly 17,400 rooms, enough to serve only 40 per cent of the student population.
Furthermore, the research found that even if the consented development pipeline of 3,615 bed spaces is completed, 60 per cent of students will still be unable to access purpose-built accommodation.
For investors, this provides an insight into the need for dedicated housing in the UK’s most popular university towns and cities.
The combination of strong demand from tenants and insufficient supply increases the potential for investors in UK student accommodation to secure healthy and regular rental yields.
This could be a key consideration for buyers from the Middle East and other global regions, who will be looking for maximum reassurance that their investment will deliver satisfactory returns.
In a Q1 2018 report from CBRE, consistent strong returns was highlighted as one of the defining trends of the student accommodation market this year.
Nearly £4.7 billion was invested in this asset class in 2017, according to the research. Analysis of CBRE’s regular valuation data of 201 schemes and 58,883 bed spaces showed a total return of 9.58 per cent in the year to September 30th 2017. Average net rental growth during this period was 2.98 per cent on a national level.
The UK property market as a whole has continued to experience growth in prices this year, particularly in regional areas and cities such as Liverpool and Manchester, which have outpaced London in recent months. This has demonstrated the resilience of the market at a time when external events – most notably Brexit – are causing a lot of uncertainty.
For Middle Eastern investors looking to make the most of the potential in the UK property market, student accommodation could be the perfect place to start.
Find out more about opportunities in the student accommodation market with Experience Invest.