Anyone who has been paying attention to the property investment market over the last decade will be able to wax lyrical about the benefits of investing in student property over a standard buy-to-let arrangement. However, something new is happening. Nowadays it’s not just hardened property investors who are looking towards student digs as a potential goldmine – others are catching up too.
Demand is high
With an expected yield of anywhere between six and ten percent, this shouldn’t really come as a surprise. Money savvy people are always on the lookout for the next big thing and the only real shock is that it has taken many of them so long to cotton on to what’s going on here.
Student property investment is now a huge business and it has, over the last three years alone, become a £2 billion industry in the UK. With the government lifting the cap on the amount of students any given university can take on from 2015/16, this figure is surely set to increase significantly over the coming years too.
In August of 2014, just shy of 400,000 students booked their place into a UK university. This record-breaking figure was in large part thanks to the the abolition of capping student numbers when the government introduced 30,000 new places across the country.
However, many analysts predict that this number is likely to be dwarfed when the cap is lifted fully. Some are forecasting an additional 60,000 students will become part of the system, but UCAS (Universities and Colleges Admissions Service) revealed in February that they have, in fact, received 600,000 applications for university places – a jump of over 200,000.
International students are among the new recruits
Another additional piece of good news for those in the student accommodation market is the surge in foreign students taking up full-time education in the United Kingdom. A recent report (Universities UK Patterns and Trends in UK Higher Education) showed that student numbers from non-EU countries has increased dramatically over the last 10 years; 59% more students from these countries are now studying here, the findings said. This increased demand can only be good for investors, and many local councils are placing student accommodation at the core of their planning policies.
Further pressure on an existing problem
The housing shortage in the UK is already causing headaches for the powers that be. Predictions for the coming few years will not ease their pain either, with some experts forecasting that there will be a shortfall in excess of over one million residential homes by 2022.
These reports are likely to work in the investors favour too. Councils are now expected to place a cap on the conversion of residential properties into student accommodation in an attempt to slow down the ever-increasing shortfall.
Does this mean that all student property is worth investing in?
The short answer to this is a resounding ‘No’. As with any property investment, student accommodation still requires a certain amount of planning and research. As corny as it may now sound, location, location, location is still a huge factor in determining whether or not your investment is likely to be a sound one.
This is where the UK based investor holds the trump card. The vast majority of the student property market is awash with overseas investment and their money is predominantly focused on the major cities: London, Birmingham, Liverpool and Manchester, for example.
The main problem of investing in the bigger UK cities is that because of the overseas investment many of the prices have become inflated. Sure, you’ll still see a return as the market audience is so saturated, but sometimes one of the more overlooked student destinations may be more profitable. While there are still undoubtedly good investments to be made in the big cities, purely because of where they are and their stability, there are often better opportunities for those with a little more local knowledge.
So, where should I be looking?
Well, first of all, consider places that you know intimately. If you have a feel for a place already, why look elsewhere? Concentrating on areas where you have a greater knowledge than outside investors can often turn up some unexpected bargains. If you already live in a university town, take the time to do a bit of digging and you may be pleasantly surprised with what you come up with.
For those who are looking for a starting point for their research, we have compiled a top ten for you here. Yes, a couple of the big cities previously mentioned make the cut, but that shouldn’t stop you from investigating places that overseas money has yet to reach.
Without further ado, let’s take a look at some of the hottest destinations for student accommodation investment opportunities available today:
With an average headcount of over 35,000 students per year making use of Coventry’s higher education facilities, this city offers a growing opportunity for investors.
Once the manufacturing hub of Britain, Leeds is now home to an ever-growing financial district that is currently booming. However, there are still bargains to be had here and regeneration of key areas is likely to see house prices rise over the coming years.
Scotland’s largest city has mysteriously remained relatively untouched by overseas investment up until now so if you do your homework you could be on to a winner here. A lot of graduates are starting to stay in the city meaning that the feel of the place is getting younger and more vibrant, making Glasgow a magnet to future students.
If you want to talk about location, Nottingham takes some beating. Pretty much slap-bang in the middle of England and close to the M1 for access both north and south, Nottingham attracts students from all over the UK.
Property prices in Oxford are through the roof, but that doesn’t mean that this world famous university city should be completely disregarded. This is generally down to the fact that rental prices are well in line with property prices, in many cases a decent 6%+ yield can still be made here.
Leicester offers possibly the best value university city dwellings available in the UK today. Reasonable prices coupled with high demand means that with a little homework and research, you could find yourself a very decent deal indeed. However, it’s worth bearing in mind that the yield is likely to be lower here thanks to the overall prices in the area.
Not far from the nation’s capital is Reading, and there are still some great deals to be had here. The University of Reading is growing in popularity and the town is also home to a campus of the University of West London, so demand in the area is good.
Part of the ‘Golden Triangle of The North’ along with Leeds and Harrogate, York is seen as up-and-coming in the eyes of many investors. Recent expansion to the university and the already brilliant transport infrastructure make this city one to look out for.
The capital was always going to make the top ten, regardless of how much money has already been poured into it. London just oozes stability and even through the recent downturn, house price remained pretty much rock-steady. Plus, if ever there was a draw for overseas students, London is it.
Another of the big boys makes the cut and, again, it’s hardly surprising. Manchester is home to over 50,000 students and demand for accommodation is often ridiculously high.
There you have it, a top ten of the best areas in the UK to invest in when it comes to student property. Keep in mind the cap being lifted in 2015/16, and if you look out for universities that are currently undergoing expansions, or making plans to at least, you might just be able to find yourself a decent investment for the future.