Student property investment refers to the practice of buying properties that are specifically designed to cater to the needs of university students. These properties can be either purpose-built student accommodations (PBSAs), converted houses, or apartments.
The student accommodation sector in the UK makes a significant contribution to the economy, both through direct and indirect impacts. According to a report by Knight Frank in 2020, the sector is estimated to contribute over £45 billion to the UK economy every year, supporting over 700,000 jobs. It is no wonder that property investors around the world are taking advantage of student property investments in the UK.
The main attraction of student property investment is the potential for high rental yields and steady demand. With the increasing number of students enrolling in universities and colleges every year, there is a growing need for affordable and convenient student housing options.
Is Investing in Student Property a Good Idea?
When purchasing a buy-to-let property it is important that it is located somewhere where there is a demand for rental properties to ensure you secure a tenant. The demand for student housing in the UK is usually high, as the UK has a large number of universities and colleges that attract a significant number of domestic and international students every year. According to the Higher Education Statistics Agency, there were over 2.4 million students in higher education institutions in the UK in the 2020/21 academic year.
In terms of the future and supply for investors, it is estimated that by 2025, 95,000 new student bed spaces will be built, making now a good time for a student property investment.
This creates a consistent demand for affordable student accommodation, with many students seeking purpose-built student accommodation (PBSA), houses with multiple occupation (HMOs), or flats to live in during their studies. This demand is particularly high in university towns and cities, where there is a high concentration of students and limited affordable housing options.
There are several cities in the UK that have high demand for student housing due to their large student populations and limited supply of purpose-built student accommodation. Some of the top cities for student property investment include:
London: London has a large student population, with many universities and higher education institutions in the city. There is a high demand for student housing in London due to limited supply, particularly in areas such as Bloomsbury, Camden, and King’s Cross.
Manchester: Manchester is home to several universities, including the University of Manchester and Manchester Metropolitan University, and has a large student population. There is a high demand for student housing in areas such as Fallowfield, Withington, and Rusholme.
Birmingham: Birmingham is a popular destination for students, with several universities and higher education institutions in the city. There is a high demand for student housing in areas such as Selly Oak, Edgbaston, and the city centre.
Bristol: Bristol is a popular city for students due to its universities, including the University of Bristol and the University of the West of England. There is a high demand for student housing in areas such as Clifton, Redland, and Cotham.
Edinburgh: Edinburgh is home to several universities, including the University of Edinburgh and Heriot-Watt University, and has a large student population. There is a high demand for student housing in areas such as Marchmont, Newington, and the city centre.
The demand for student housing can vary depending on the location so it’s important to do your research. Overall, the student housing market in the UK is generally considered to be a consistent and strong one, offering potential for steady rental income and long-term capital growth for property investors which we discuss in more detail below. Therefore we would say that yes, a student property investment in the right location is definitely a good idea.
Is Student Accommodation Still a Good Investment?
Putting your hard earned money into any property is generally seen as a good investment providing you do your research first. Student property investment in particular comes with many positives.
Student properties can provide higher rental yields compared to traditional buy-to-let properties, with yields ranging from 5% to 10% or more, depending on the location and property type. Purpose-built student accommodation (PBSA) can offer higher rental yields compared to traditional residential property, due to the high rental rates that can be charged for student housing.
As with any buy-to-let investment, the most important thing is securing a tenant in order to receive an income. The demand for student accommodation is usually high, leading to low vacancy rates, which can reduce the risk of having a vacant investment property and therefore income loss for property investors.
Student accommodation can offer a stable income stream, with tenants typically signing leases for a fixed term, such as one academic year. Many will then renew their lease for the following academic year. This can provide investors with a predictable income stream that is not subject to the same volatility as other forms of investment.
Is Student Housing a Good Investment UK?
We have covered the fact that there is high demand for student housing in the UK. However, is student property investment still a good idea long term in the UK?
The UK property market has historically been considered a stable and reliable investment over the long term, with steady growth in property prices and consistent demand for housing.
While there can be fluctuations in property prices and demand in response to economic and political events, the UK property market has generally demonstrated resilience and the ability to recover from downturns. This makes student property investment in the UK an attractive investment option for those seeking long-term returns and capital growth.
Additionally, the UK government has implemented policies to support the student accommodation sector, such as the expansion of higher education and the provision of student loans.
Are Student Houses Profitable?
Student houses in particular can be profitable investments, but the level of profitability depends on various factors, such as location, property type, and demand from students.
One advantage of investing in a house as a student property investment is the potential for high rental yields, which can range from 5% to 10% or more. This is because students often share accommodations, allowing investors to charge higher rent for individual rooms within a property. Say you have a 4 bedroom house with 2 reception rooms. You could use one of the reception rooms as a 5th bedroom and have 5 student tenants, all paying rent for their individual rooms.
In the UK, the average rent for a student room in a shared house can range from around £75 to £200 per week, depending on the city and the property’s amenities. This means a weekly income of £375-£1000 per week for 5 tenants. Therefore, in terms of a student property investment, student houses have the potential to be highly profitable. Moreover, student houses located in areas with high demand can benefit from long-term rental income as students typically require accommodations for the duration of their studies.
How Do I Invest in Student Property?
There are several ways to invest in student property:
Direct investment: This involves purchasing a student property yourself and managing it yourself or through a property management company. This method can provide the highest potential returns, but also requires a significant investment of time and effort should you decide to manage it yourself.
Investment trusts or funds: These are managed investment products that pool the capital of multiple investors to purchase and manage student properties. This method can provide diversification and potentially lower risk, but returns will likely be lower than going down the route of a direct investment.
REITs: Real Estate Investment Trusts are investment vehicles that own and manage income-producing real estate properties, including student accommodation. REITs can provide a tax-efficient way to invest in student property and can offer liquidity through public trading on stock exchanges.
Crowdfunding: This involves investing in student property projects through online platforms that allow investors to pool their money together to invest in a specific property or project. This method can provide lower entry costs and potential for diversification, but returns may be lower and there may be limited control over the investment.
Before investing in student property, it’s important to conduct thorough research and due diligence on the investment opportunity, including factors such as location, property type, rental yields, occupancy rates, and maintenance costs. It’s also important to consider your financial goals and risk tolerance to ensure that the investment aligns with your investment strategy.
If you are thinking of investing in student property then we would recommend your first step be to speak to a buy-to-let property specialist. They will be able to discuss your options with you in more detail and advise the best route to take for your personal circumstances.
Here at 365 Invest we have the experience and knowledge required to guide you through your journey purchasing a student property as well as renting it out in the future. We offer an end to end solution, making your student property investment easy and stress free. For more information please contact us here at 365 Invest.