Over the past two years there has been a huge surge in student housing investment activity in the United Kingdom, and student accommodation is certainly big business right now. Last year alone saw more than £2 billion of investment from U.K. and overseas investors in this booming property sector.
Since 2011, student accommodation has outperformed all other traditional property assets and has been the strongest growing investment property market in the U.K. It has also continued to be one of the most resilient investment sectors, with rental incomes and property values remaining stable, or increasing. The attraction of the student accommodation sector has been driven by structural undersupply and positive rental growth year on, despite the economic downturn.
According to data from real estate firm Savills the average gross cash rental yields for the student property sector in the North West of England was 13 percent for the first three quarters of 2014, well ahead of the 6.37 percent forecast for average student property yields across the U.K. for this year. These yields are as much as 6 percent to 7 percent higher, on average, than the buy-to-let market as a whole, which stood at 6.2 percent between April and June 2014 according to Savills.
Mish Liyanage, Managing Director of The Mistoria Group, said: “Investing in student accommodation offers overseas investors a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties, than a comparable buy-to-let property in the same city.
“What’s more, the domestic student population is continuing to expand, with an extra 30,000 university places offered in 2014. UCAS have reported they are expecting an all-time high of 500,000 applications this year.
“Students in the U.K. will pay more for high quality, well-maintained accommodation than for the traditional run down and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation.
“The vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills, so the better quality properties are highly sought after.
“I believe it is realistic for numbers of international students in higher education to grow by between 15 percent and 20 percent over the next five years. There is no cap on the number of students who can come to study in the U.K. and the structural undersupply will continue to remain in all key university cities ensuring excellent sustainable rental growth.”
PropertyGuru suggests that investors looking at this property class assure themselves of the details of any guarantees on offer, what can be expected after the guarantee period expires and defines a clear exit strategy. Currently there is no clear resale market for student property units in the U.K.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
