Why Is Investing in Student Accommodation a Good Idea?

Daniel Williams
Daniel Williams
Senior Property Writer
Updated 20 September, 2021
7 Min Read

Is Investing In Student Property a Good Idea Is Investing In Student Property a Good Idea

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 2022?

It’s been a record-breaking year in the real estate market. 

Property prices have increased at their highest level since 2004 and surpassed a UK average of £250,000 for the first time ever. 

Rent has also shot up in price, with the HomeLet Rental Index recording an average UK rent of £1,060 in December 2021 – the second-highest ever on record. 

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 2022. 

Here are four facts why investing in student accommodation is a good idea in 2022. 

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.

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 £5.77 billion in the PBSA sector last year.  

For context, that’s 5.7% higher than in 2019, and is 0.8% higher than the previous record held in 2015. 

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 comments that this continued investment in PBSA “reflects a broader trend of re-allocation from traditional real estate sectors to rented residential accommodation.” 

In the UK, PBSA occupation rates fell quite considerably in 2020.  

For the academic year 2019/20, around 98% of rooms were occupied in the UK’s largest PBSA operator, Unite. 

In 2020/21, however, this fell to 88%.  

While on the surface, this spells doom, the numbers can be easily explained by students being forced to leave their accommodations and move back home due to lockdown restrictions. 

And judging by the latest UCAS application statistics, the market is set for a considerable bounce back in 2022. 

UCAS has reported a stunning 8.4% rise in university applications for the upcoming academic year – a sign of an expanding market. 

Alongside an 8.4% rise in university applications, there has been a 17.1% growth in applications from non-EU countries. 

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 September 2021 from Rightmove found that there is currently the hottest ever competition to buy properties, with buyer demand per available property over double pre-pandemic levels. 

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

There are currently around 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 2022. 

1. Investment in Student Accommodation Reaches a Record-High

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 £5.77 billion in the PBSA sector last year.  

For context, that’s 5.7% higher than in 2019, and is 0.8% higher than the previous record held in 2015. 

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 comments that this continued investment in PBSA “reflects a broader trend of re-allocation from traditional real estate sectors to rented residential accommodation.” 

2. UCAS Applications Rising Spells Growth for Sector

In the UK, PBSA occupation rates fell quite considerably in 2020.  

For the academic year 2019/20, around 98% of rooms were occupied in the UK’s largest PBSA operator, Unite. 

In 2020/21, however, this fell to 88%.  

While on the surface, this spells doom, the numbers can be easily explained by students being forced to leave their accommodations and move back home due to lockdown restrictions. 

And judging by the latest UCAS application statistics, the market is set for a considerable bounce back in 2022. 

UCAS has reported a stunning 8.4% rise in university applications for the upcoming academic year – a sign of an expanding market. 

3. UK a Top Destination for Foreign Students

Alongside an 8.4% rise in university applications, there has been a 17.1% growth in applications from non-EU countries. 

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.

4. Private Investors Needed With PBSA in Short-Supply

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

A report in September 2021 from Rightmove found that there is currently the hottest ever competition to buy properties, with buyer demand per available property over double pre-pandemic levels. 

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

There are currently around 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 2022. 

The Benefits of Investing in Student Property The Benefits of Investing in Student Property

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 PBSA 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 2022. 

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.

Where Should You Invest in PBSA? Find Out in Our Top 10 Student Areas Investment Guide

Learn More
The Pitfalls of Investing in Student Property The Pitfalls of Investing in Student Property

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.

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 sky-rocket 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 2022 is PBSA. 

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

In 2022, 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.  

1. HMOs or PBSA?

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 sky-rocket 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 2022 is PBSA. 

2. Invest in High-Quality New Builds

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

In 2022, 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.

3. Focus on Student Cities With Location in Mind

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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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. 

Daniel Williams
Daniel Williams
Senior Property Writer

Daniel Williams is a senior property writer at RWinvest. Regularly publishing in-depth articles on topics such as the best investment areas in the UK and guides on how to invest, Daniel has a keen eye for statistics and analysing property market changes.