Student Housing – An Increasingly Popular Investment

“Student housing has become an increasingly popular investment in recent years. The sector has ballooned from a fringe investment 10 years ago to being a global market worth $200bn today.” – Financial Times

Becoming a student is a good long-term investment in the future and so is property investment. Put the two together – and factor in undersupply along with high demand – and you have a collision that makes student property white-hot in the UK.

Student property investment has increased roughly in line with the rapid growth of universities in the UK.

The UK’s universities have continued to expand their campuses, as more young people opt to study for the degrees that have become almost essential to gain employment in middle-class professions.

Savills expects total returns from student property to increase 14% this year with rental growth of 3.5%.

Student accommodation is attractive, due to consistently high occupancy rates of 99% and what amounts to undersupply of good quality accommodation.

A recent report by Knight Frank on student property concluded: “It (student accommodation) has outperformed every other commercial property class and delivered consistent returns throughout the economic downturn.”

In 2015, 4.2 billion was invested in the student housing market, according to Saville’s report into the sector. This was 70% up on the previous year. 

Investors are chasing average net yields of 7% or higher on student property in the best UK locations.

The student property market is renowned for outperforming the wider rental market – with landlords of student properties generating a higher average income by letting properties on a per-room basis rather than the usual per-property basis.

By leasing property to students on a per-room basis, landlords made an average income of 6.45%, compared to 5.94% from properties rented out to young couples. The West Midlands proved to be a goldmine for those investing in its student property market.

Demand for student property shows no signs of slowing down, so it is well worth making an educated decision and adding student property to a portfolio.