Ask the average person on the street which method of investment ranks above all others and you’ll probably find that the vast majority will respond with one word – property. Putting our money into bricks and mortar has long been the investment of choice for us Brits, but what about drilling down further still? Which part of the housing market offers the very best return on investment?
Student property has been a popular choice for many investors of late, and for good reason. The demand for student property is rising and the record numbers of places being offered by universities up and down the country looks set to increase year on year for the foreseeable future.
Couple this with the fact that there is a huge shortage of preferred accommodation for students and it is easy to see why student property is regarded as a winner by many investors. Purpose-built student accommodation (PBSA) is lagging way behind the demand, which is leading to fantastic returns for those putting their money into this section of the housing market.
International demand as well as domestic
With the government lifting the restrictions on the amount of students UK universities can take on, student numbers are set to skyrocket over the coming years. This demand will not only be fuelled by British students looking to get the best possible start in life, but also by those from overseas.
The UK is widely regarded internationally as having one of the finest academic systems in the world and overseas students are looking to capitalise on the opportunities on offer here.
Investors are proving hungry for specialist property
The specialist property market is outperforming even expert analysts’ wildest dreams at present, with £5.9 billion being invested in the first six months of the year. Student property is leading the way in the sector, contributing around £3.5 billion towards the overall figure – a total of 59% of the whole market.
If investment continues at the current rate, the final figure for 2015 could exceed £12 billion, a number that would blow the original estimate of £10 billion for the year out of the water.
Student property doesn’t follow normal investment cycles
The majority of traditional investments are subject to fluctuation and changes within their relative markets, but PBSA has, to date, been impervious to these fickle forces. Student property performed well throughout the recent economic crisis, showing a stable return while other investments floundered and flopped.
One reason for its trend bucking nature is the fact that, during times of recession, young people are far more likely to go to university rather than risk spending their early working life in long spells of unemployment. This stability can mean the difference between a healthy portfolio for investors and one that keeps them awake at night.
Will it continue?
It is believed that the student accommodation sector will prove to be a great market for many years to come. Reasons why this should be the case are wide and varied, but some of the key points to take note of include:
- Low supply of quality accommodation currently in the UK for students
- Growth of students enrolling expected, thanks largely to the lifting of number restrictions
- Increasing numbers of overseas students choosing to study in the UK
- Great fill rates and exceptional returns
- The overall appetite for property investment in the UK remains strong
With these points taken into consideration it’s hard to see student accommodation investments doing anything other than going from strength to strength over the coming years.
Feature image credit: Comrade Foot via Flickr.