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Why Is Investing in Student Accommodation a Good Idea?

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    Investing in Student Accommodation

    After huge growth over the last decade, student property investment has increasingly become one of the most popular strategies for investors.

    But is it right for you?

    We hope to answer this question and more in this ultimate guide.

    Here, we ask, “is investing in student accommodation a good idea?” and give you the latest facts and figures to help answer this question.

    You will learn:

    • Is Investing in Student Property a Good Idea?
    • Are Managed Student Properties a Good Investment?
    • How Good Are Student Property Investments UK?
    • How to Choose the Best Student Property Investment?

    This guide is one of seven released as part of our student property investment series. You can check out the rest of our content by clicking the link – all completely for free.

    Read on to find out more.

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      Is Investing in Student Property a Good Idea in 2024?

      Following predictions of price drops in 2023, the market now seems to be on the rebound.

      Property prices increased 0.5% in April after seven months of declines, according to Nationwide building society.

      Rent has also shot up in price, with the HomeLet Rental Index recording an average UK rent of £1,213 in May 2023 – up 10.0% annually.

      So, while the wider real estate market is performing highly, how is student accommodation as an investment performing?

      Well, good news for investors, as yes, student accommodation is performing incredibly highly in 2024.

      Here are four facts why investing in student accommodation is a good idea in 2024.

      For the sake of clarity, we will be talking exclusively about purpose-built student accommodation (PBSA) in this guide.

      This is because it is by far the most popular form of student property investment, but it’s important to note you can also invest in HMOs.

      To learn more about HMOs, PBSA, and how to invest in student property, be sure to check out our in-depth guide.

       

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      4 Reasons Why Student Property Investment Is a Good Idea in 2024

      Despite economic pressures caused by Covid-19, student accommodation investments reached a record high in 2020.

      According to a report from property experts Savills, investors spent a whopping £7.8 billion in the PBSA sector last year – up by 89% on 2021.

      Looking at how much was invested in UK PBSA, it’s clear that investors from across the world as still confident in the UK sector’s ability to provide attractive returns for the foreseeable future.

      Savills also notes there is likely to be continued investor appetite for PBSA in the coming years, with a recent European Living Investor Survey finding that around two-thirds of investors are expected to deploy more money into PBSA over the next three years.

      In the 2021/22 academic year, over 628,000 full-time, first-year students started an undergraduate degree – the second year in a row to have over 600,000 new starters.

      Analysis of the UCAS application and acceptance data indicates this trend is likely to continue, with 618,000 starting in 2022/23 and 622,000 in 2023/24

      There is continued growth expected in the number of applicants, with UCAS predicting almost  1 million university applicants in 2030.

      This is great news for those investing in PBSA. As the number of students continue to grow, the demand for accommodation will skyrocket alongside it.

      Between 2019/20 and 2021/22, the number of full-time EU students fell by -26,690, while non-EU international students rose by 144,175.

      This is significant for investors as non-EU students are far more likely to rent in high-quality, purpose-built student accommodation, typically because they have wealthy parents.

      There are around 130,000 applications from Chinese students, who are 2.2 times more likely to live in PBSA than UK students.

      Likewise, applications from USA students have increased by over 60%, who are 1.9 times more likely to live in PBSA.

      This increase means PBSA can be an even more lucrative strategy for investors, particularly those focusing on Liverpool and Manchester.

      Both cities, located in North West England, have a huge Chinese student population, with one in five students in the University of Liverpool being Chinese.

      For that reason, if you are eyeing up the most lucrative opportunities for purpose-built student accommodation, then these two cities are excellent choices.

      You can check out our dedicated guides to student property investment in Liverpool and student property investment in Manchester by clicking the links.

      A big factor being the record-breaking growth seen in the UK property market has been a lack of supply.

      A report in May 2023 from Rightmove found that there is currently the hottest-ever competition to buy properties, with buyer demand 3% higher than in 2019.

      This short supply has also been seen in the student property market.

      There are currently over 2.4 million students in the UK, according to UCAS, with a further 500,000 on the way by 2030.

      The UK market is unable to keep up with this demand, with the latest figures suggesting that full-time students outweigh PBSA by 3:1.

      Universities own around 70% of the UK’s PBSA, meaning they are now relying on private investors to help deal with this demand and increase the available supply of high-quality dwellings.

      For this reason, there is an excellent opportunity for investors to make a truly lucrative investment in 2024.

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      How Good Are Student Property Investments UK: The Benefits of Student Property Investment

      Now that we’ve looked at the general outlook of the student market, let’s try and answer the question, “is investing in student property a good idea?” by looking at the benefits of student property investment.

      Firstly, student property is far more affordable than traditional buy-to-let properties, with prices often falling below the £100k mark.

      For instance, at RWinvest, we have luxury student homes from only £74,950 with ELEMENT – The Quarter.

      Secondly, while properties are affordable, rental costs are usually high thanks to the premium facilities on offer in certain PBSAs, like onsite gyms and cinema rooms.

      With these low prices and high rental figures, rental yields are some of the highest out of any property class, with common returns upwards of 8% NET.

      Lastly, student property investment can be completely hands-off. With most student developments, there will already be a dedicated student management company meaning you will not need to fulfil any landlord duties.

      For these reasons, if you’re asking, “is investing in student property a good idea?” or “are managed student properties a good investment?” then yes, student investment is a great investment in 2024.

      Pros:

      • PBSA is more affordable than traditional buy-to-let property.
      • If you buy new-build student properties with an investment company, you can get assured rental returns for several years.
      • High rental yields due to low property prices and high rent from premium facilities.
      • Massive demand for PBSA, with three full-time students for every available bed.
      • Completely hands-off investment.
      • Two forms of returns through both rent and capital growth.

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        How Good Are Student Property Investments UK: The Pitfalls of Student Property Investment 

        While the answer to the question, “are student properties a good investment?” is yes, there are certain downsides and pitfalls of student property investment you should be aware of.

        There are generally only two widely considered downsides to student property investment.

        For starters, with student property investments, capital appreciation tends to be far lower than traditional residential property.

        While student investment properties will certainly grow in price, they won’t do so to the same degree as residential purchases.

        Moreover, when it comes to selling your student property, you are likely to find a smaller resale market.

        This is because only other investors will be looking to purchase a student development.

        However, these drawbacks are fairly minor in comparison to the benefits on offer.

        Cons:

        • Capital growth potential is less than in traditional buy-to-let property.
        • May struggle to re-sell as there’s a smaller resale market comprising of only investors.

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        What to Consider When Buying a Student Property

        Are student properties a good investment?

        While the answer to this is usually yes, there are certain aspects of a property investment you need to focus on to ensure your student investment is as successful as possible.

        With this in mind, the following tips, tricks, and questions will help you plan out a successful student property investment.

        Before investing in student property, you need to decide how to invest.

        There are currently two popular ways you can start investing in student property, either with an HMO or purpose-built student accommodation.

        HMOs, otherwise known as Houses of Multiple Occupancy, were previously one of the most popular forms of investment due to many second and third-year university students opting to live there.

        However, a culture change amongst students that saw demand rise for high-quality modern furnishings has seen PBSA skyrocket in popularity and HMOs fall behind.

        HMOs are also subject to stringent laws and legislation that differ between local authorities, making it a confusing investment for beginners.

        For this reason, the likely best investment choice in 2024 is PBSA.

        As mentioned, student appetites for property have changed, with an increasing amount opting for more high-quality furnishings.

        In 2024, many premium student developments come with extra facilities, including gymnasiums, security, and even cinema rooms.

        It’s a good bet to invest in a development that supplies these high-quality facilities to ensure you attract as much interest as possible.

        If you want to find and buy student accommodation investments, be sure to click the link to see the latest releases from RWinvest.

        To make the most lucrative student property investment as possible, it’s crucial you invest in a city with high student numbers.

        Naturally, the higher the number of students, the more in-demand properties will be, which will have a positive impact on your potential returns.

        To identify a student city, it’s a good idea to look at employment opportunities on offer, nightlife experiences, the quality of universities, and the graduate retention rate.

        All these factors together will create a thriving student scene for years to come, which will guarantee the future safety of your investment.

        It’s also a good idea to invest in accommodation that is located nearby to transport links, shops, nightlife, and a university. This will also ensure you generate as much interest as possible.

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          Best Places to Invest in Student Accommodation UK

          Hopefully we have helped answer the question, “is investing in student property a good idea?”

          Now that you know if you should invest in student property, it’s time to take a quick look at the best places to invest in student accommodation in the UK.

          We have a dedicated guide for this, so if you want to look in even further detail at the best places to invest, be sure to click the link and read our free guide.

          We evaluate the best places to invest in student accommodation based on several important factors.

          They are:

          • A high number of students
          • Attractive employment opportunities
          • High-quality universities
          • Exciting nightlife opportunities
          • A strong graduate retention rate (the number of students that stay in the city after graduating).

          Looking at these criteria, there are some obvious cities you should be interested in.

          The best cities likely are:

          1. Liverpool
          2. Manchester
          3. Leeds
          4. Sheffield
          5. Nottingham
          6. Cardiff
          7. Birmingham
          8. Newcastle
          9. Edinburgh
          10. Brighton

          These are obvious choices with high student populations and significant return potential.

          To learn about these student cities in-depth, be sure to check out our complete guide to the best places to invest in student property.

          Who Is RWinvest? 

          We hope we have helped answer all your questions on student property investment.

          If you want to learn more or even buy a student property, RWinvest is the company for you.

          We are an award-winning property investment company with over 17 years of experience in student property.

          We have recently published several in-depth guides to student property, so you can become a complete expert on student investments.

          The best part? You can read them all completely for free.

          Topics we have covered include:

          To learn about any of these topics, be sure to click the links for instant access.

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