Changes in the landscape of investing in student housing
Why has student buy-to-let investment been on the increase?
1. Buying student property offers stronger yields than residential property. It is no coincidence that larger institutions have been and still are more active in buying student accommodation investment than in standard residential property. If you have had the unfortunate experience as a parent of how much property your child gets for your money renting as a student you will understand why. Rents per square foot are extremely high.
2. In a volatile economy, with solid returns more challenging to come by, student property is considered by many institutional investors as a solid investment with strong returns.
3. There has been a major change to the landscape of student housing investment opportunities over the last couple of years because most local authorities in major university towns and cities have begun enforcing article 4 planning restrictions. This prevents the conversion of residential properties to student accommodation. It has led to an increase in purpose built blocks by student accommodation developers, predominantly constructed by institutions. These institutional investors can see that continued growth in student numbers despite the introduction of tuition fees, plus the complete removal of competition from private landlords converting new student accommodation in key areas is putting pressure on the supply. This in turn increases occupancy rates and pushes up rents for students.
With the increase in institutional student accommodation investment, has come an increase in purpose built student accommodation which can be purchased by individual investors. This is the opportunity to buy en suite rooms and studios in purpose built student blocks.
Some purpose built developments are now being sold which offer a gym, 24 hour security, pool room and lounge areas. These high quality developments are being tailored to the high end of the UK student market and the rapidly increasing numbers of wealthy overseas students whose parents may be less than enthusiastic about them sharing in a stereotypical student house.
They are usually packaged offering assured returns. The demand has been high with every development we have been involved in selling out off plan. There have been a couple of developers who got it wrong in the early days so it is important to buy through companies with a good track record. The industry is still very small. At the time of writing, to the best of our knowledge, there are only around 15 developments on the market selling individual en suite rooms and studios in the UK. Some developments are being marketed without planning and others by developers with no track record of managing this type of investment. Fixed Income Acssets only markets developments with planning from developers with a solid track record.