Recent research by CBRE – a company that leads the way in providing commercial property services – showed that in the first 6 months of this year, £800 million was invested in student accommodation, over twice that invested in the sector for the same time period in 2011. Although applications from the UK may have fallen for university places this autumn, likely due to the rise in tuition fees, this is small in the grand scheme of things. Applications from non-EU students have seen a significant increase with a rise of 13.7% on last year. Applicants from South-East Asia – where significant importance is placed on education and the reputation of UK universities are revered – dominate those from overseas students, with these students contributing £2 billion to the UK economy each year. Growth in the number of students entering higher education is set to continue and investment within the student accommodation sector is likely to remain one of the best options in which to place your money. London, Manchester, Leeds and Sheffield – cities who already have large student populations – have been identified as hot spots in which to invest in student accommodation.
While the buy-to-let sector as a whole has seen a rush of investments and is generally seen as a safe bet to put your money into, investing in traditional buy-to-let properties does have its limitations. Whether you choose to invest in purpose built student accommodation or apartments close to a university campus, you can look forward to a tidy profit. So what benefits does investing in student accommodation offer over residential buy-to-let properties?
The promise of higher yields
Take two apartments in the same city, the one rented to students can provide a higher rental income than that let to other tenant groups. Thanks to the large shortage of student accommodation – only 50% of students are thought to have access to purpose built accommodation, equivalent to 100,000 students in London alone – this has driven up the rental price of such properties. Investment in student accommodation has a proven track record; in the last 6 years those who have invested in student accommodation have welcomed an increase in rental income of between 3 and 5%, with net yields frequently at 10% for landlords.
A low risk investment for some
Despite the recession, student accommodation has escaped unscathed, with the price of such properties and their rental income remaining stable, despite the fall in the value of other properties. You will also be almost guaranteed to have a tenant for most of the year when you invest in student accommodation – the occupancy rate is over 99% – and usually you will know up to 7 months in advance that you will have a tenant for the following academic year, as students tend to arrange the next year’s accommodation early in the spring term. Although placing money within student accommodation is best seen as a long-term investment, if the property is an apartment in a building close to a campus rather than purpose built student accommodation, it can always be sold for residential use.
Requires little work on your part
If you are looking for a hassle-free investment, this is the perfect option for you, as all you need to concern yourself with is paying the mortgage and management fees, as the day to day management and bills will be taken care of for you.
An example of a potential investment currently available
Liverpool’s Paper Mill development has 102 en-suite rooms, with prices starting at £48,000. Already 60% of these have been sold and those who have invested can look forward to a net yield of 10% within the first year.
This article is written by a freelance news writer and should not be taken as investment advice or an invitation to buy property in Liverpool. In fact Probuytolet has no connection to any of the parties or products mentioned in this story.