With university towns and cities usually appearing in top areas in which to invest in property, it’s no wonder that investors are becoming increasingly interested in investing in student accommodation. While potential landlords may shy away from traditional student accommodation, such as HMO’s and house shares, the rental yields offered by purpose built student accommodation, combined with the benefits of on site management are starting to attract investors keen to add such a secure asset class to their portfolio. Tom Zajac, Senior Property Consultant explains why purpose built student accommodation (PBSA) is becoming popular.
Tom Zajac says ‘There are currently almost 1.8 million full time students studying in the UK and universities are struggling to provide students with accommodation, in fact only 1 in five students are guaranteed a private sector or university owned bed. Gone are the days where students, particularly international students, will settle for sub-standard accommodation, and are instead expecting good quality – not just when it comes to their rooms, but also in terms of on-site facilities which can be offered by PBSA.’’
Student numbers have increased every year in the UK since 2012, despite a decline in the population of school leavers. An increasing interest from those overseas wishing to study in the UK, has also contributed to the thriving student market, with over 28% of those studying at UK universities now overseas students.
A Stable Asset Class
One of the attractions of PBSA is the stability of the rental demand as Tom points out ‘In towns like Manchester and Liverpool, the demand is hugely outstripping supply, meaning that investors are not just benefitting from rental yields that have risen, but the very nature of student tenants means that occupancy levels are high when compared to other asset classes. For example, in Liverpool, demand raised by 38% over 2017.’’
Students are also becoming more discerning when it comes to accommodation choice, making new build developments with on-site facilities increasingly popular as Tom explains ‘’the generation of students who are now entering university are not settling for accommodation that doesn’t meet their needs. Of growing importance are items such as communal study spaces, high speed internet and also a feeling of community which is not offered in private single lets.’’
Interest in PBSA has risen since the noticeable stability of the asset class throughout the economic downturn. As Tom points out ‘Purpose built student accommodation weathered the storm that was the 2008 crash exceptionally well, which has in turn ensured that more investors are taking notice of it as a safe investment for their portfolio’
Excellent Entry Rates
The other obvious benefit to student accommodation, is the relatively low entry rates when compared with single let property. As Tom suggests ‘With prices starting under the £100,000 mark, and rental yields in Northern cities at an average of 6% – 8%, purpose built student residences attract both new investors who are looking to dip a toe at a reasonable price, parents of students looking to invest in a university city, and also professional funds looking to add a reliable asset class to their portfolio. It’s one of the safer investments types, therefore we find that we have a wide range of interest whenever we launch a new site’
If you would like to find out more about Benoit’s range of Purpose Built Student Accommodation across a number of cities, get in touch to see how we can help you to plan and expand your property portfolio.