August 30th, 2017
With the new academic year approaching in September and students up and down the UK preparing for their first year at university, everybody seems keen to jump on the Purpose-Built Student Accommodation (PBSA) bandwagon.
With reliable rental yields, good capital appreciation and a relatively low point of entry, it has become extremely attractive for those with an interest in property investment. For some years now the number of students accepted by UK universities has been rising healthily and there has only been a slight dip this year despite Brexit.
Popularity tends to be concentrated around the UK’s major cities such as Manchester, Liverpool, London and Edinburgh with other smaller towns and cities gaining traction, offering a wider variety of courses and subjects.
In the larger cities it is becoming increasingly difficult for developers to source land or buildings for developing PBSA. In Glasgow, Edinburgh, London and other cities there have been a number of acquisitions of old council land, derelict sites or old hotels.
As popularity continues apace though, developers and providers are required to get increasingly creative with ways to redevelop prime city property.
A former private hospital in Clifton purchased for more than £8m is set to be the latest building in Bristol to be turned into student accommodation. Most recently occupied by Nuffield Health, the former hospital on Upper Byron Place between the Triangle and Brandon Hill occupies a 3,400 sq. m site. It has been bought for £8.08m and will be turned into a “100+ bed premium student accommodation development”.
Other cities such as Liverpool have seen old hospitals as well as other creative redevelopments such as old cinemas, old hotels and old dockyards.
Student property has the ability to command a rather more consistent level of demand, and as such investment rarely wins. Over the past few years, more than £3bn of investment has made PBSA one of the hottest asset classes around. Moving forward it may just be the beacon of reliability that investors need. This year, Savills predicts growth of over 17% in investment levels in student housing, with more than £5.3bn set to be spent.
The biggest positive in terms of the student property market is how it continues to be able to provide investors with a level of demand. For example, the political uncertainty that came about this year may have seen UCAS data showing a 5% drop in applicant numbers thanks to worries about the future of the EU, but there are still more than 560,000 people applying for courses in the UK this year, and that creates a sustained demand, with the majority likely to need somewhere to rent in the private sector. This is especially true in cities like Liverpool, where the more than 57,000 students outnumber available rooms, meaning there’s a real demand for more investment moving forward.
Regardless of the situation, student landlords can rest assured that the 2017/2018 academic year is set to provide another bumper year for investors.