As UK residential property prices continue to drop, investors are advised to turn their attention to a buoyant student accommodation market, as an assured way to expand and diversify their portfolio.
With the deluge of changes over the past two years in the way that universities in the UK are allowed to run, investors could be forgiven for thinking that the student accommodation market was an unfamiliar investment. However, recently published reports on this sector have highlighted how, instead of a decline in student numbers, universities are experiencing an overwhelming amount of applications, something that their existing facilities cannot cater for.
The global mobility trend for Higher Education has been steadily rising for a number of years, with non-domiciled students accounting for more than a sixth of the UK student population. Although the rise in tuition fees has caused outrage amongst home-grown students, universities have traditionally charged non-EU students higher fees, so compared to worldwide university fees, the UK remains competitive.
Additionally, the work restrictions put in place for entering the country on a student visa by the UK Border Agency last year means that only the most affluent of students will be able to afford to study here. The UK is currently ranked third in the world for the price of tuition fees for overseas students, highlighting the need for universities to package their courses and institutions more attractively.
The private sector currently accounts for approximately 40% of all UK student housing needs, as universities increasingly find that they cannot keep up with the demand for affordable accommodation. Recently published research by residential property experts Knight Frank indicates that approximately £500m will be generated by universities over the next five years, due to the disposal of their existing halls of residence to the private sector.
The UK student accommodation market accounted for more than £740m worth of capital in 2011, according to research by commercial property advisor CBRE, fuelled, in part, to the growth in rental prices and high occupancy levels in regional cities.
Historically, the student accommodation market in the UK has always been a solid investment for institutions, with pension funds the driving force behind the majority of ventures. Over the past couple of years however, the market has shifted towards a more commercial offering and specialist companies like Knight Knox have penetrated the market by re-packaging and selling individual units, which are more attractive to private investors.
Attracted by this lucrative investment opportunity (average rental yields are 6-6.5%), both domestic and overseas buyers alike are focussing on building stylish, affordable accommodation for a more consumer-focused student.
After recent successful ventures in Birmingham and Liverpool in the provision of bespoke, boutique student accommodation, Knight Knox is making major strides in the UK student buy-to-let market, with at least three major developments underway. St Ann’s Lodge in Headingley, Leeds and Nelson Square in Bolton are both major refurbishment projects that have drawn major investment from buyers. Attracted by assured 10% rental yields that are currently outperforming virtually all national property investments, and the knowledge that a specialist student management company will handle all queries, both projects currently have high occupancy rates, which shows why student accommodation is one of the strongest performing asset classes in the country.
For further information on our range of UK buy-to-let student properties contact Knight Knox on +44 (0)161 772 1370 or visit www.knightknox.com.
By Samantha Jones