Student Property Investment

Student Property Investments

The student property investment market is one of the highest performing asset classes when it comes to investments in the UK. The market for buy to let student property has grown rapidly over recent years, with the UK student market having outgrown the US student property sector in 2015. Today, anyone who’s considering building a property portfolio in the UK won’t ignore student property investments, recognising the potential that this type of investment has to offer. But is student accommodation a good investment?

If you’re new to the UK property market and want to find out more about this popular investment option, or you’re an experienced investor and unsure if student property investment is right for you, take a look at this detailed guide to investing in student accommodation. In this guide to UK student investments, we discuss what student property investment is, the benefits of student accommodation investment, the best areas in the UK to buy student properties, and answers to some commonly asked questions about student buy to let. Scroll down to read more.

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Contents

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Student Property Investment

Pros and Cons of Student Property Investment



Student Property Investment

Is Student Accommodation a Good Investment?



Student Property Investment

Best Locations for Student Property Investment



Student Property Investment

Checklist for Investing in Student Property



Covid-19 & the UK Property Market:

Should You Still Invest?

 

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What Is Student Investment?

Before asking yourself whether buying student accommodation is a good investment, you need to understand the basics. So what exactly is student property investment? Student accommodation as an investment refers to purchasing and owning a property for the purpose of letting it out to tenants and generating income through rental payments.

Recent Student Accommodation Trends in the UK

According to a study by the National Union of Students, it was found that out of every ten students in the UK, four of these deemed their accommodation as ‘substandard’. Many of the issues students encountered revolved around the property itself, with 42% of students reporting problems with damp and insulation, and 16% experiencing electrical issues.

From 2010 to 2016, there was a 68% rise in levels of demand for more high-quality purpose-built student accommodation. During the same period, there had been a rise of just 9% for more traditional housing and university-provided accommodation.

Statistics like these highlight the fact that the UK’s students favour modern and high-quality accommodation over the more traditional shared student housing of the past. Students tend to be interested in accommodation that supports their studies and lifestyle. The majority of students will seek out accommodation that’s well-located, well-decorated, and comes with good access to WiFi, featuring built-in appliances like white goods and other gadgets.

What are the Different Types of Student Property Investment?

The two most popular ways to invest in student property are to purchase a purpose-built student property or to buy a student house. A purpose-built student property, or PBSA, is a property that has been developed for the sole purpose of being let out to tenants. A shared student house, also known as a student HMO, is a house in which multiple student tenants live while sharing facilities like a kitchen, bathroom and lounge.

There are benefits to both of these student investment types, so let’s take a look at the pros and cons to help you decide which route to take.

Pros of Investing in PBSA

  • There’s a high demand for purpose-built student accommodation in the UK.
  • PBSA is usually a new build, meaning you won’t need to worry about maintenance or refurbishments.
  • If you invest in an off-plan Purpose Built Student Property development, you can benefit from below-market rates.
  • The majority of PBSA developments are normally based in prime locations such as the city centre, increasing your chances of high yields and capital growth.

Cons of Investing in PBSA 

  • While there’s still the possibility of strong growth, capital growth may not be as high as with residential investments.
  • If you invest in the wrong city or development, you may find that you generate less rental demand and lower yields.

Pros of Investing in a Student HMO 

  • You can rent to multiple tenants at once, generating more substantial rental returns.
  • If one tenant doesn’t pay their rent one month, you will still have some rental income to fall back on.

Cons of Investing in a Student HMO

  • There are more regulations and requirements involved with HMOs compared to standard buy to let properties.
  • It can be challenging to secure a buy to let mortgage for an HMO investment.
  • Maintenance costs are higher since the property is a house rather than a single apartment. It also costs more to furnish an HMO.
  • Recent trends show that students are now more interested in renting private student accommodation instead of shared housing, so you may find that there’s a lower demand for student HMOs.

Purpose-Built Student Accommodation

Pros of Investing in PBSA

  • There’s a high demand for purpose-built student accommodation in the UK.
  • PBSA is usually a new build, meaning you won’t need to worry about maintenance or refurbishments.
  • If you invest in an off-plan Purpose Built Student Property development, you can benefit from below-market rates.
  • The majority of PBSA developments are normally based in prime locations such as the city centre, increasing your chances of high yields and capital growth.

Cons of Investing in PBSA 

  • While there’s still the possibility of strong growth, capital growth may not be as high as with residential investments.
  • If you invest in the wrong city or development, you may find that you generate less rental demand and lower yields.

Student HMO

Pros of Investing in a Student HMO 

  • You can rent to multiple tenants at once, generating more substantial rental returns.
  • If one tenant doesn’t pay their rent one month, you will still have some rental income to fall back on.

Cons of Investing in a Student HMO

  • There are more regulations and requirements involved with HMOs compared to standard buy to let properties.
  • It can be challenging to secure a buy to let mortgage for an HMO investment.
  • Maintenance costs are higher since the property is a house rather than a single apartment. It also costs more to furnish an HMO.
  • Recent trends show that students are now more interested in renting private student accommodation instead of shared housing, so you may find that there’s a lower demand for student HMOs.

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Is Student Accommodation a good investment? The Benefits of Student Property

High Demand

No property venture can succeed without demand. High levels of demand are essential in order to receive consistent rental income from a regular stream of tenants. In the UK, student investment properties are in high demand due to large student populations. Attending university is now much more popular than it has been in the past, with record numbers of people having been accepted onto a university course in 2018.

During 2017 and 2018, a total of 2.3 million students were recorded within UK institutions according to the HESA Student Record. Out of these high UK student numbers, a large proportion are from overseas countries. In 2016/17, the UK welcomed around 450,000 students, creating multiple new student accommodation investment opportunities. These high international student numbers are what puts the United Kingdom on the map as the second most popular study destination in the world. Students from China, Hong Kong, India, Malaysia and the US make up 38% of enrolment within universities in the UK.

Best Areas for Student Property Investmetn

A Desirable Tenant Group

Students are often considered the best tenant group to rent to by a lot of investors. There are a number of reasons for this. One reason is the fact that since student tenants tend to have a guarantor in the form of a parent or guardian, it’s not likely that you will suffer from any loss of income if the tenant couldn’t meet rental payments.

Another reason is that since for the majority of students, living in student accommodation will be their first time living away from home, they’re likely to treat their landlord respectfully and avoid any issues. The perception of student tenants as being reckless with security or causing damage to properties is now outdated. Today’s students are a lot more security savvy, seeking private student apartments with CCTV, and following any tenancy rules, whether this is to do with limiting visitors/parties in the property or keeping their accommodation clean and tidy.

High Rental Yields

Returns are a major factor of any investment. After all, without making a return on your investment, what are you getting out of the venture? One of the reasons why so many are attracted to student property investment in the UK is because rental yields are typically high.

Student properties, especially those in the form of a studio apartment, tend to have lower purchase prices than residential properties. While purchase prices are low, however, rental costs remain considerably high, especially with more luxury student accommodation opportunities. This combination of low property prices and high rental costs results in some very attractive yields for student property investment, reaching as high as 8% or more in the right location.

 

Capital Growth

Along with demand and rental returns, capital appreciation is also a big part of all investment strategies and another major element to consider when finding a UK student accommodation investment. Capital appreciation is when a property grows in value over time. This is an important part of your strategy, as it ensures you make a significant return on your investment when you choose to sell it further down the line, maximising your overall returns alongside your rental income.

The UK student property sector is estimated to be worth £53.2 billion — that’s a 72 per cent rise in value since 2014. With the student property market growing in value so rapidly, and the student population ever increasing, things are looking bright when it comes to the future of student property investment.

 

Foreign Investment

The UK is one of the most popular areas for overseas investment. According to research conducted by Knight Frank in 2017, 70% of UK student investment came from overseas buyers. All five of 2016’s biggest student property deals were sold to international investors, with the most significant deal being 25 student buildings across the UK which were purchased by a Singapore state investment fund. This highlights the strength of the student housing market in the UK and the overall benefit it has to the country’s economy.

The UK has a strong process in place when it comes to foreign property investments. Overseas investors purchasing a student investment property in the UK will be guided through the process by the property company selling the investment, a solicitor, and a financial advisor if necessary. This way, foreign investors involved in buy to let student accommodation will understand what’s involved with a UK investment, being offered information on things like taxes and buy to let mortgages.

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What’s the Best Location in the UK to Invest in Student Property?

As with any property investment, the location of your student buy to let investment plays a big part in the venture’s overall success. As already mentioned, rental yields, demand, and capital appreciation are the most important elements of a student property investment, and the potential behind these can vary depending on the location you invest in.

If you look at predictions for property prices after Brexit, you can see that house price growth in Northern cities is expected to remain strong, while London property prices could be affected. Thinking into the future is so important with all investments, so this is something you should factor into your student investment. Here are three of the top student cities considered hotspots for buy to let student accommodation investment.

Liverpool Waters

Liverpool Student Property Investment 

Student Population: Approx 70,000
Average Rental Yield: 5.05%
Capital Growth Predictions: 24% (North West)

Liverpool is considered one of the top cities in the UK to invest in student property. Widely known as a thriving university city, investors who explore student buy to let opportunities in Liverpool can benefit from plenty of rental demand thanks to a student population of approximately 70,000.

Liverpool boasts a high average rental yield of 5.05% according to Go Compare. However, those investing in student accommodation in Liverpool should definitely delve a little deeper into the best buy to let postcodes in the city to benefit from higher yields. Liverpool made the Totally Money list of the best buy to let yields in the country, with six postcodes in the city boasting rental yields of over 7%.

The L1 Liverpool postcode was ranked number one on the list of 25 buy to let areas thanks to an average yield of 10.00%. This shows the importance of researching yields before looking for student property investment opportunities. Since inner-city Liverpool postcodes tend to generate the strongest yields, they’re often a more promising buy to let option than more suburban areas for student investment.

Along with rental yields and a high student population, one other reason why Liverpool is so promising for property investment is due to strong capital growth rates. Property prices have been growing significantly in Liverpool and the North West region, with predictions for the region’s property prices to grow by 24% by 2024.

manchester student population

Manchester Student Property Investment

Student Population: Approx 90,000
Average Rental Yield: 5.55%
Capital Growth Predictions: 24% (North West)

Manchester is another key city for student investments. Much like Liverpool, this Northern city is known for its student scene, with a population of over 90,000 students across a number of renowned universities. Because of this high demand, those who purchase a buy to let student property in Manchester don’t have to worry about a loss of income through void periods.

Rental yields in Manchester average around 5.55% according to Go Compare’s guide, while certain postcodes like M3 and M6 generate rental yields of up to 7.89%. The M6 Manchester postcode presents a great opportunity for student buy to let due to being based in Salford – home to the University of Salford.

Since Manchester is also based in the North West region, this means that Manchester property prices are expected to see growth of 24% by 2024. Manchester property prices have increased over the years, with Zoopla statistics revealing a rise of 4.40% in the last twelve months. With ongoing regeneration and a thriving student scene, Manchester student property investment makes a great option for your next buy to let venture.

Leeds Student Property Investment

Student Population: Approx 60,000
Average Rental Yield: 4.29%
Capital Growth Predictions: 21.6% (Yorkshire & the Humber)

Leeds is a UK area which is becoming more popular for its property investment opportunities. Because Leeds is such a prominent university city, home to a range of top institutions, many people are considering student accommodation investment in Leeds.

While the student population in Leeds is slightly lower than that of Liverpool and Manchester, it’s still a city worth exploring when it comes to student buy to let. Rental yields in Leeds average at around 3.29%, while some areas such as the popular student hotspot, Headingley, generate yields as high as 7.4%. Rental costs in Yorkshire and the Humber are also shown to be increasing, with an average growth from around £4,000 to almost £6,000 for student accommodation in the region between 2011 – 2018.

Growth is also predicted to be high for Leeds property prices, with predictions for the Yorkshire and the Humber region to see house price growth of 21.6% by 2024. Next to Liverpool and Manchester, Leeds is one of the top UK cities right now for regeneration, making it a great choice for investors to explore when it comes to long term capital appreciation.

I would definitely recommend this company to anyone purchasing student investment properties.

Sharon Pidoux, Investor

FAQs

Student property investment is a great option for first-time investors. Property prices are considerably lower than with residential investments, and rental yields are high. Through regular rental returns, you’ll be able to grow your income and build a well-rounded property portfolio more easily.

An off-plan property is a property that hasn’t been built yet, whereas a refurbishment property is a property which already exists and has been renovated. There are a number of benefits to buying off-plan student properties. These benefits include the fact that off-plan investments are usually offered at a lower rate, and boast excellent capital growth potential, with a good chance of increasing in value before the property is even complete.

There are certain taxes for investors to consider when it comes to student property investment in the UK. Anyone purchasing a second home, such as an investment property, is required to pay stamp duty tax on properties worth £40,000 and over. Another tax that those investing in student buy to let will be required to pay is capital gains tax, which is a tax made on any profit you generate after selling your property.

If you’re an overseas investor, you should definitely consider buying a student investment property. Buying property in the UK has a lot of advantages for overseas investors. Not only do you get to benefit from the chance to make lucrative returns from a thriving market, but the investment process is a lot more straightforward for international investors than in some other countries.

I’m a First-Time Investor – should I Invest in Student Accommodation?

Student property investment is a great option for first-time investors. Property prices are considerably lower than with residential investments, and rental yields are high. Through regular rental returns, you’ll be able to grow your income and build a well-rounded property portfolio more easily.

Should I buy an Off-plan or Refurbishment Student Property?

An off-plan property is a property that hasn’t been built yet, whereas a refurbishment property is a property which already exists and has been renovated. There are a number of benefits to buying off-plan student properties. These benefits include the fact that off-plan investments are usually offered at a lower rate, and boast excellent capital growth potential, with a good chance of increasing in value before the property is even complete.

What Taxes are involved with UK Student Accommodation Investment?

There are certain taxes for investors to consider when it comes to student property investment in the UK. Anyone purchasing a second home, such as an investment property, is required to pay stamp duty tax on properties worth £40,000 and over. Another tax that those investing in student buy to let will be required to pay is capital gains tax, which is a tax made on any profit you generate after selling your property.

Can I buy a UK Student Property if I’m an Overseas Investor?

If you’re an overseas investor, you should definitely consider buying a student investment property. Buying property in the UK has a lot of advantages for overseas investors. Not only do you get to benefit from the chance to make lucrative returns from a thriving market, but the investment process is a lot more straightforward for international investors than in some other countries.

Checklist: How to Invest in Student Property Effectively

To invest in student property effectively, there are certain things you need to know about and systems to follow to ensure you’re getting the most out of your investment. To summarise our guide to student investments, keep these following tips in mind before purchasing a student buy to let property.

Think About What Your Tenant Wants

Figures show that students in the UK are leaning more towards modern Purpose Built Student Accommodation rather than shared housing. By taking information like this on board and weighing up the pros and cons of PBSA vs HMO investments, you could ensure a more steady stream of tenant demand for your student investment.

Find the Right Location

Certain locations in the UK offer more lucrative student accommodation investment opportunities. Research buy to let hotspots to make sure you’re investing wisely and benefitting from the highest rental returns, demand, and potential growth.

Consider Off-Plan Student Properties

Off-plan investments can offer benefits to investors, including below-market rates and the ability to pick out the most attractive units. Consider making an off-plan student property investment if these qualities appeal to you.

Seek Advice if You’re a First-Time Investor

If you’re a first-time investor that’s interested in making a student buy to let purchase, seek advice from property and/or financial experts. At RWinvest, we’re always happy to offer information about the UK property market and advise you on suitable student accommodation investment opportunities.

Find Your Next Investment Opportunity With Rwinvest

RWinvest is proud to specialise in both student and residential UK investment opportunities, with buy to let properties in Liverpool and Manchester. When thinking about getting involved with student accommodation as an investment, we use our expertise to help you make the most informed decision. Focusing on rental returns, location, and potential growth, we help our clients secure the most exciting student investments on the market.

  • We have a wealth of experience working with both experienced investors and those who are investing for the first time.
  • Whether you’re based in the UK or internationally, we can provide you with attentive customer care at all times, guiding you through the investment process and keeping you updated on the status of each development.
  • We work with only the very best property development companies on the market, bringing our clients developments of the highest quality.

If you’re interested in any student property for sale with RWinvest and are ready to take your next step, contact us today to begin your investment journey!

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