Investing in student property has become a popular option in the UK real estate market. The demand for purpose-built student accommodation in city centres is rapidly increasing, and this trend is expected to continue in the future. In this article, we will explore the reasons behind this surge in demand and the potential benefits for investors.
Growing Market
One of the main drivers of the growth in the student property market is the shortage of student beds. According to data from StuRents, the UK’s largest portal for student accommodation, there will be a shortage of around 450,000 student beds by 2025. This reflects a staggering 217% increase from last year’s figures. As a result, the private sector is under immense pressure to fill this gap in student accommodation, creating opportunities for investors.
The demand for student property is fueled by the increasing number of applicants for undergraduate courses. In September 2022, a record-breaking 450,000 students enrolled in universities across the country. After spending several years studying remotely, more students than ever are returning to campus, leading to a surge in demand for high-quality student accommodation.
Developers of purpose-built student accommodation have experienced unprecedented demand. In fact, by July 2022, they had already filled 90% of their accommodation spaces for the 2022/23 academic year. This is a faster rate than during the pandemic and even exceeds pre-Covid levels. This indicates a strong and sustained demand for student housing, creating an opportunity for investors to capitalize on rental increases of up to 20% in some towns.
Student property is an attractive investment option for several reasons. Firstly, it is usually more affordable than regular residential properties. Additionally, the high demand for student accommodation allows investors to rely on consistent rental income throughout the year. The growing demand also enables landlords to increase rental prices, resulting in higher rental yields on their investment portfolios.
Furthermore, students are increasingly preferring modern purpose-built student accommodation over traditional buy-to-let properties. These purpose-built properties offer modern amenities and are often located near campuses or in major city centres. This proximity to universities and the vibrant city life makes these properties more appealing to students, enabling investors to charge higher rent.
The responsibility of tackling the student housing crisis largely falls on delivering new purpose-built student accommodation. This provides an opportunity for investors to meet the demand by providing attractive and affordable housing options for domestic students. However, the challenges of high land prices and construction costs can pose barriers to entry.
Some investors may also consider “turnaround” projects, refurbishing and revamping existing purpose-built student accommodation assets to maximize returns.
Additionally, students today are more discerning consumers. They expect more from their university experience and prioritize the quality of their accommodation. Amenities, shared experiences, and a sense of community are important factors for this generation. Therefore, student accommodation schemes are incorporating amenities like outside spaces, communal facilities, and areas for hybrid learning and remote working.
Conclusion
The future of the city-centre student property market looks promising for investors. The growing demand for purpose-built student accommodation, driven by a shortage of beds and increasing student enrollment, presents an opportunity for investors to secure steady rental income and potentially higher rental yields.
By providing modern and attractive accommodation options, investors can tap into the preferences of today’s students and meet their evolving lifestyle expectations. However, challenges such as high land prices and construction costs need to be considered in the investment decision-making process. Overall, the student property market offers potential for great gains and is worth exploring for those looking to invest in the UK real estate market.