Why is the UK such an attractive market for student property investors?
Every major city has a university, some more than one and where there is a university there are students and all those students throughout their periods of study, need accommodation.
It is estimated that only fifty percent of all students in the UK have access to high-quality and specifically purpose-built student accommodation. When you look at high dense population areas, it’s expected that this figure declines to even less, somewhere in the region of just twenty percent. This massive shortage means a wonderful investment opportunity is available to any savvy investor.
Doing the maths, it looks like there are almost a hundred thousand students alone in the London area that have a high demand for accommodation and that demand is only ever going to rise! Student property really needs to be conveniently located and by that, we mean close to good areas for socializing and on good public transport links to the university campus. Tick those essential boxes and you will have students knocking down your door in a rush to rent from you.
I appreciate this might sound too good to be true but dense populations spring up in inner city areas that quickly become known as student zones. While this may put off traditional private sales and in some cases cut pricing of private sales of property, for the specific student property expert, this is a perfect situation where you will be able to maximise your return on investment in very quick time. Some good examles of UK locations include Brighton, Plymouth, Bristol, Liverpool, Manchester, Edinburg, Exeter and needless to say London.
If accommodation is purpose-built for students then the quality of student is higher, this means the rental returns are higher and you can also attract overseas students, many of which will not have the budget limitations facing local students. Think of purpose built student accommodation mimicking smaller halls of residence. For this you need ideally a larger property that can be split into studio style rental apartments numbering four or five. If you can get such a property close to or next to the University campus then this will strengthen the purpose built approach and really boarder your student market appeal.
Students are reliable, they rent for set periods of time, and you get plenty of notice of the tenancy ending and can literally replace those tenants with the next student intake. All you need to do is make sure you are ahead of the student calendar and make use of current tenant’s recommendations, word of mouth advertising or post notices within University campus areas or on the host of student accommodation websites. It is unlikely you will ever be short of a hungry demographic.
The UK has always attracted a broad spectrum of investors, but due to the increase of students looking to rent temporary accommodation, there has also been an increase in student property investors. They are essentially buy-to-let investors with a keen focus on the student market.
The UK also offers property investors a strong and consistent annual yield. The property value in the UK can grow much over the years. This mainly due to the active market, high demand and limited amount of land to develop property on.
David Cameron has recently decided to increase the influx of overseas students from India, which means that we will not be seeing a decrease in the demand for student property anytime soon. If you are a property investor I suggest that this is a market worth looking into.
How to find a hotspot to invest in student property?
UK’s top universities are in more demand than ever. Therefore, there are excellent opportunities for student property investments. The question is where should you buy? UK universities are enjoying a good intake. While other industries continue to suffer, UK student lecture halls are crammed with eager beavers from around the world.
Think about the following – where intelligent young thinkers flock, house prices follow. The number of students applying for university fell last year (2012), caused mostly by the hike in tuition fees, but now students are back and raring to go. There is a 2.7 percent increase in applications this academic year. This means more overseas students than ever are pursuing their studies in the UK. Theirs parents, usually wealthy, follow their offspring with hefty wallets.
This is good news for those who own properties in popular areas. Higher education has become a marketplace, with universities competing for applicants. Successful student towns have become hubs with soaring demand for housing, meaning high rental yields as well as capital appreciation. This autumn, about 550,000 students will be packing their bags for colleges and universities alike. Universities can accommodate all first year students in halls of residence, but majority of students, more than 70 percent in most university towns, prefer accommodation in the private sector.
In London, it is common to see weekly rents of £300 for a room. Luxury high-end accommodation geared for student overseas with money to spend is a very popular market at the moment.
Given such cost, many parents with a bit of spare capital go with the idea of buying their children a property to live in while at university. After graduation, the home stays as a buy-to-let investment. Looking at the local student buy-to-let market at a national level before taking the plunge helps you avoid buying a flat in a market which is depressed.
You can apply the rule of the more renowned the university, the stronger the buy-to-let market. For example, Cambridge students are not just brainy, but they are formidable cash cows. The university is continually expanding, and the population of the city is expected to increase by more than 20 percent in the next 10 years. As a result, the student rental sector is booming.
In Cambridge city Centre, rental values have risen by an average of four to five percent over the last seven years, while house prices have remained all but static. Investors are quick in identifying the growth potential in a market where demand for rental properties is constantly rising.
Oxford is another blue-chip destination for the buy-to-let investor, with a steadily expanding student population and has easy access to London.