Following another bumper year for student property investment, we seek to highlight the positives aspects of the market and the challenges it faces in the future.
Despite the UK facing some economic uncertainty over the previous 12 months, there are no indications of a slowdown in the student property market – in fact, more landlords than ever invested in student property over the course of 2016.
What impact will the EU referendum have on the market?
Investors, developers and management companies appear to be relatively relaxed about the impact of Brexit on the student accommodation sector. With regards to sales, either complete or ongoing, we haven’t seen any significant negative impact from the vote to leave the European Union. Sales have, in fact, increased.
The number of international students choosing to study in the UK continues to grow, and this is a reason for existing landlords to be positive and for potential landlords to consider an investment. International students represent a large section of the student population and are the group most likely to demand the sort of high quality student accommodation provided by the Purpose Built Student Accommodation (PBSA) market. They have the desire, the means and the will to pay for the best quality rental accommodation, and landlords should look to take advantage of this self-replenishing pool of good tenants.
How much more can the student accommodation market grow?
A good example to use when answering this question is the North West city of Liverpool. The Liverpool market is often cited as being oversupplied with student property, but there is a phenomenal pipeline of student developments in development. However, it is unlikely that the market itself will suffer. As with any property, the high quality, well located apartments will continue to grow in value and produce excellent rental yields; the low quality apartments will suffer, just as they do in any property market.
The advice to investors in this situation is quite simple – make sure to do thorough research. In cities such as York, Edinburgh, Glasgow and Nottingham there is always an appetite for the best and highest grade student accommodation. If investments are made wisely then high yields and strong tenancy rates are extremely likely.
Will designs differ in the future?
Roughly five years ago there appeared to be an emphasis on the play aspect of student accommodation - the game room, gym, and cinema. Now, experts are finding that there is more of a focus on study and social-learning space.
With increases in both fees and the pressure which students are placed under, many are now thinking about their investment in their education and what they’re going to be doing beyond that, and quality study spaces are an important part of making the most of your university years.
This seems to mirror what’s being done in the Private Rented Sector – the blurring of the lines between work, life and communal activities.
Where can we expect the market to go in the coming years?
In 2016, the PBSA market grew by leaps and bounds. Private investors have jumped on board as the number of students enrolled at UK universities keeps on rising. According to the Financial Times, the UK PBSA market is now worth about £43bn, and professional PBSA landlords are in the ascendancy over more traditional university halls.
With success that has bucked the economic trend so successfully, it is hard to see where PBSA will falter in profitability or popularity. That being said, the winners will be those who can see the best value in an increasingly crowded market and act on it quickly.
Student property is extremely profitable and a solid income stream for investors and this trend is set to continue into 2017!