February 9th, 2016
In the past 5 years alone, student accommodation has grown not just in popularity with student tenants but also grown as a tangible investment asset in its own right. Over the past 12 months, the sector has reached maturity, graduating from an ‘alternative’ asset to its current status as a mainstream asset class alongside the more well-known sectors of commercial and residential.
However, just because it is relatively new to the mainstream investment arena does not mean student accommodation is no less important than its pre-established counterparts—on the contrary, student housing has more than proved itself to be able to compete in the investment market.
Furthermore, with its niche audience of students, student accommodation can offer things that other mainstream property cannot: namely high year-on-year occupancy rates (often well above those found in the residential sector) and highly competitive yields as more and more students prove themselves willing to pay substantially more for bespoke accommodation—naturally the better the accommodation, the more they will pay. Therefore, the higher the premium, the more returns a landlord stands to gain.
Here StudentPodshop gives you five reasons why you should invest in student accommodation:
1. LOWER PURCHASE PRICES
It is a well-known fact, especially in the wake of rising property prices, that residential properties can cost an arm and a leg. And this is no different for those looking to purchase a buy-to-let property—homes in some of the more desirable locations in the UK can often cost hundreds of thousands of pounds. However, one of the many inherent positives about the student accommodation market is that it boasts entry prices that are significantly lower than the residential sector, with some student properties available for just £50,000.
2. HIGH DEMAND AND LOW AVAILABLE STOCK
In almost every university city across the country, demand for student accommodation is far outstripping available supply—most popular university cities find themselves with a surplus of students (with the average being 70% or higher) not housed by their respective universities. This poses a big problem for most university cities inundated with a large student populace but nowhere to house them. This is where Purpose-Built Student Accommodation (PBSA) comes in handy—students are willing to pay more for accommodation, both out of necessity and desire. They need a place to stay during their studies, which is why they will look outside their overcrowded halls of residence provided by their universities, but they will not just settle for substandard accommodation—as with any thrifty tenant, students will also be armed with a checklist of things they want their student property to offer.
3. HIGHER-THAN-AVERAGE YIELDS
Because this sector is so scarce with new-build properties, the ones that do come to market can generally command significantly larger rent thanks to growing demand. Therefore, despite the lower entry cost into the student accommodation market, the dividends are anything but diminished, as student property can command higher rents and thus higher yields for its landlord.
4. LOW VOID PERIODS
Since demand is high and available stock is low, students have to grab available accommodation with both hands. This lack of student housing is only a good thing for those who choose to invest in student accommodation, since as long as this supply deficit exists demand will be high for existing properties—and this is likely to carry on year-on-year. Every academic year brings with it a new (and a possibly larger) student population, so the chances are what is in demand now (properties in a central location close to the universities and with good amenities) will still be in demand years down the line, especially if supply is still severely limited. Therefore, as well as high occupancy rates year-on-year, student properties also boast low void periods, and are even known to have unparalleled rates of retention from returning students.
5. CHANGING STUDENT NEEDS
Even if university-provided halls of residence are on offer, most savvy students in this day and age would prefer something a little more up-to-date. Gone are the days of cramped student rooms with shared bathrooms—these days, modern students want an equally modern place to call home, even during their studies. With the cost of tuition rising astronomically (2012 saw the introduction of tuition fees reaching up to—and in some cases beyond—£9,000) and the rising accommodation costs that come alongside this, more and more students are looking for (and subsequently expecting) more from their accommodation, and the bog-standard halls of residence will just not cut it anymore. This is why more and more students are actively looking for PBSA, not as a last-resort, but as a first choice for their preferred student accommodation—bespoke student housing is nowadays more akin to residential living, with some developments even operating like mini hotels! When thinking of modern student accommodation, your mind will no longer think of the peeling wallpaper, dreary single beds and dirty shared bathrooms of the past—instead, tenants are now actively choosing the more luxury, all-inclusive lifestyle, complete with private kitchenettes, luxury en-suite bathrooms and large, spacious beds and study spaces.
So what are you waiting for? Invest in student property today!