The student property investment market in the UK has evolved considerably in recent years, and what was a fringe investment ten years ago is now an integral part of many investors portfolios. Whilst the last few years has seen a considerable increase in the supply of new build student developments, the student property market has matured significantly in recent times. Todays investors are seeking opportunities offering higher yields and immediate income with excellent track records across management and occupancy.
We offer a wide range of student accommodation investment opportunities, with properties throughout the UK's leading student destinations. There has never been a better time to add a student investment property to your investment portfolio.
Over the course of the past five years, we have seen significant changes in UK student property market, as students look to move away from the traditional HMO (House Multiple Occupancy) model, and more towards city centre based private halls of residence. With students now acting as more discerning consumers, the demand is growing for the new style high spec halls of residence, and students are willing to pay a premium to live in this style of accommodation.
Pure Investor - Our Focus On Completed And Tenanted Student Properties
Here at Pure Investor, our portfolio of student properties focuses on completed and tenanted student properties for sale in destinations including Liverpool, Sheffield, Middlesbrough, Leeds, Nottingham and Manchester amongst others. By focusing our efforts on this sector of the market, we're able to give investors the opportunity to purchase student properties with immediate rental income and a strong track record of occupancy.
Here at Pure Investor, we're regular visitors to our student developments, ensuring we have a robust understanding of the development, its management team and occupancy rates. Our focus on completed and tenanted student properties ensure our investors have full clarity when it comes to both rental income and ongoing costs.
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So what have been the major changes in the UK student property investment sector, and what are the implications for people looking to purchase a student accommodation investment?
Over the course of the past twenty years, we have seen a huge increases in the numbers of students attending a higher education establishment in the UK. Where once attending a university was considered a privilege of the elite few, higher education is now commonplace, and last year saw over 450,000 new full time students attending a higher education establish in the UK. These figures are all the more surprising given the recent increases in annual student tuition fees.
In 2011/12, it was estimated that overseas students studying in the UK paid just under £4 billion in tuition fees to higher education establishments, in addition to approximately £6.3 billion in living expenses. Whilst competition is growing from other markets, the UK universities are highly regarded throughout the world, and demand is consistently high for places from students from outside of the UK. At present, it is estimated that the numbers of overseas students studying in the UK will increase by approximately 15-20% over the next five years. Typically, overseas students are more likely to favour the new private halls, with their high specification finishing’s and city centre locations, and in some way it could be said that they have initiated this growing demand for high quality student accommodations.
Far removed from the traditional HMO model, the new style private halls of residence reflect the growing buying power of the modern student. Complete with high specification finishes and interiors, these halls typically offer larger 'studio style' rooms for rent. Plasma TV's, Wi-Fi, high speed broadband, gymnasiums, games and entertainment rooms are all becoming standard features within the new style privately managed halls of residence. Typically, rents in the new privately managed halls are up to 75% higher than more traditional HMO's in some of the more popular student destinations, however even in less popular locations student rents tend to be around 20% higher in private halls as against HMO's.
According to the most recent Knight Frank Student Report, total investor returns for student accommodation investments in the UK averaged 7.8% per annum. Whilst these returns have slowed from the higher levels of previous years, it is estimated that the current will prove a stabilising figure in 2014. Although rental growths have averaged around 5% in recent years, it is thought this figure will average at approximately 2.7 - 3.0% next year.
It is worth noting that since 2011, the student property investment sector has outperformed all other property asset classes, as structural undersupply has resulted in positive rental growth year on year. Overall, it is thought that the yields on offer within the UK student property market are robust, and are likely to prove sustainable in the years to come.
Now we have determined that student property is a viable investment opportunity, what are the key considerations for investors looking to purchase a student buy to let property in the UK?
Q. Why should I consider student accommodation investment instead of buying a traditional buy to let property?
A. Over the course of the past 6 years we have witnessed a considerable growth in demand for student investment properties in the UK, both from UK based investors as well as those based overseas. Key to the appeal of these type of investments is the high yield on offer from student property, which currently averages between 7-10% per annum. Compared with standard residential buy to let investment whcih averages in the region of 4.5-6.0% per annum, it's easy to see why so many investors have chosen to add student investment properties to their portfolios.
Recent figures have shown that student rents throughout the UK are increasing by approximately 3.5-4.5% per annum. With overall demand for purpose built student accommodation increasing all the time from increasingly discerning students, it's no surprise that student property investment is now considered to be one of strongest performing asset classes for investors.
It is also worth noting that student accommodation investment is considered to be completely 'hands free.' In other words, the property management company will be responsible for the all aspects of the development including maintenance, sales and letting and day to day management. You simply receive your rental income, which is typically paid out quarterly in arrears from the management company. For this reason, we believe that working with the correct management company is often key to ensuring the long term success of a student property investment, as this is something we discuss in detail with clients looking to invest in student property.
Q. Are student properties sold on a freehold or leasehold basis?
A. If you are purchasing a student property in England, then the likelyhood is that you will be purchasing on a leasehold basis, and usually these will range from 125 years up to 999 years. If you are purchasing a student property in Scotland, then you will likely find that this comes with 'unfettered ownership' which is the equivalent of freehold in England.
Q. Who will manage my student property for me?
A. Over recent years the management of purpose built student developments has become a big business, and with all markets there are some companies who are better than others. As independent consultants in this sector we have worked with a large number of specialist student property management companies over the years, and today this is critical in our decision whether to market a new student project or not. As part of the consultation with our clients we will discuss the management companies and their track records in the sector.
Q. As with buying a residential buy to let property, how important is location when buying a student property investment?
A. Location is crucial to the long term success of your student property investment, however it is overly simplistic to simply look for close proximity to the local university. Other key factors which should be taken into consideration include proximity to the local shops and transport and entertainment districts. Outisde of simple proximity to the local universities, it is also worth considering the potential of the local area. For example, ask yourself if this is an up and coming area which is likely to contribute to capital appreciation over time.
Q. I am based outside of the UK, is this a problem when buying a student property?
A. Approximately 60% of our clients who invest in student properties are based outside of the UK, and everyday we speak with clients from Hong Kong, Singapore, Dubai, Malaysia, China and throughout continental Europe. The key reason that overseas clients deliberately choose us is our local market knowledge. Far from following the 'call centre' approach to property investment, we are regular visitors to the projects and sites we sell, both during the sales process and beyond into the construction phase. This ensures we are able to provide up to date information on the projects and developers we repesent, ensuring our clients make more informed decisions regarding student property investment.
We sell large volumes of student investment properties, primarily throughout the major UK university cities, and in recent years we have experienced the phenomenal growth in the student market as investors from all over the world seek to capitalise on the growing demand for student accommodation investment in the UK.
From our offices in Manchester, we work with a large network of investors from destinations including the UK, Hong Kong, Malaysia, Singapore, China and India on a daily basis. So if you are interested in a student property for sale for investment purposes, why not contact us today to discuss your requirements in more detail?
We look forward to speaking with you!
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