Even with the political tumult faced by the UK in the wake of the Brexit referendum and uncertainty in the stock and currency markets, student property has maintained its reputation as the most reputable asset class in the world.
British bricks and mortar has always represented a stable, secure and profitable venture for both domestic and overseas investors, and the UK student property sector is the strongest part of this well-established market. Student accommodation investment has proved to be the best performing form of investment in the UK’s commercial sector for nearly half a decade, and the market only displays signs of unabated growth.
In 2017, over £3 billion worth of student property units were sold; a figure that doubled the combined numbers achieved in both 2013 and 2014.
The continued rise of student numbers in the UK’s esteemed higher education institutes and the transformation of both expectations and presentation of student accommodation in recent years has meant the market is ripe for both investment and fantastic profits.
It really is no secret that across the UK, the demand for high end, luxury student accommodation far exceeds supply. As soon as new developments become available, buy to let investors are inundated with enquiries from potential tenants. Leading property firms such as RW Invest find their new student property developments snapped up in double quick time.
With a little planning and forethought, buy to let student property investors can make huge returns thanks to the impressive yields these properties offer. By its very nature, student property is a different beast to the traditional residential property market. Purpose-built student accommodation (PBSA) represents a less costly outlay for investors, as paying for a single purpose-built unit is always cheaper than the starting costs of a standard residential property.
The increased demand for a higher standard of student accommodation and living also entails great returns for investors. The days of sub-standard, damp student digs in less than desirable areas are long gone. The students of today expect a little more for their money than an old terraced row on the outskirts of their university town or city.
The demand from students for on-site gyms, high-speed broadband, spacious en-suite rooms within the confines of bustling city centres doesn’t mean a buy to let investor has to break the bank just to get started. In booming cities like Liverpool, Manchester and Birmingham, investors will be heartened to find that house prices are well below the national average, while conversely, rental yields are well above returns expected elsewhere across the UK.
A canny investor would do well to note that in Liverpool’s L7 postcode, an area popular with students that covers Kensington, Edge Hill and parts of the city centre, offers an astounding average rental yield of 11.79%. That makes it the best performing rental yield postcode in the entire country. The average entry cost for investors stands at £118,225; a figure well below the national average property asking price.
Similarly, Manchester’s M14 postcode, which covers two university campuses in the city, is another of the country’s best performing student rental yield areas. At 10.08%, investors will find another surfeit of potential tenants and returns that are very rarely matched in other sectors and industries.
Such great yields and low prices can be found across parts of the UK that may be ignored by residential property investors too focussed on London. Parts of Middlesbrough, Edinburgh and Newcastle also offer that sweet spot of low entry costs and high yields that has made the UK’s buy to let student property market the best asset class for investors, perhaps the world over.