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P McCabe, UK

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Why Now Might Be A Good Time to Invest in Student Accommodation

Gareth Hill 7th February 2016 Student Property Investment

For many investors, their perception of student accommodation in the UK may well be founded by distant recollections of student days past or old episodes of the Young Ones. Well, this is an image that’s very much stuck in the days of yore, and a far cry from the high quality student ‘digs’ of today.

In the case of an increasing number of students across the big university cities of Great Britain, their accommodation experiences are not the clichéd old inner city terraced houses with dodgy windows, mouldy fridges and mysterious odours. Nowadays, you are far more likely to find student’s finding lodgings within eye-catching apartments and halls with modern facilities and convenient locations.

Properties, in other words, which tick a lot of boxes when it comes to finding attractive investment opportunities.

Heavy Investment in 2015

While the sector has been bubbling away for a number of years, it was 2015 which has seen the market reach new levels of interest from some fairly heavyweight investors in the UK and from overseas. As reported in the Independent back in June, more than £4 billion was invested into the market in the half of the year, a record level of investment that continued throughout 2015.

A clear indication that student accommodation is now a market to take very seriously, with property developers clearly seeing opportunities to make some healthy returns on investment.

So what has made student accommodation so appealing?

Increased Demand

As with most markets that offer investment opportunity, the big draw for the market in recent years has been the fact that demand for student accommodation has been on the rise for more than a decade. In particular this demand has come about due to increased levels of international students coming to study at UK universities.

Attracting international students is a huge part of a university’s revenue stream and, across the country there’s been a 50% increase in the numbers of overseas students, making up an all-time high 18% of the total number of students in the UK.

Change in Student’s Living Habits

Another significant factor in the increased opportunity for returns in the student accommodation sector can be found when investigating the types of accommodation that students are looking to live in while at university. More specifically, the way in which this has changed from years gone by.

Whilst the Young Ones image is a comical exaggeration of student digs from previous eras, it is an image based in a degree of truth. Whereas it was indeed the norm for students to live together in Houses in Multiple Occupations (HMOs) the student of the twenty-teens generation is much more likely to want to live in a purpose built development within reasonably close proximity (or along good transport links) to their place of study.

Student developments tend to offer students accommodation that’s either cheaper or better value for money, offering ancillary benefits such as access to a gym or well-equipped communal and entertainment areas. Providing better quality furnishings and amenities having a tendency to pay dividends for savvy and conscientious investors in the sector.

Change in Student Priorities and Standards

A reason that investors are reaping the rewards of investing in higher quality developments is that students are becoming considerably more discerning in what they want from their accommodation and indeed their lifestyle.

When you’re paying upwards of £9,000 per annum on your academic study, it’s no great surprise that students (and their parents) are now looking at finding better value for their money. Not to mention the fact that the actual study part of their University life is taking on ever higher importance. Students are looking for greater comfort, greater access to University and greater chances for peace and quiet in their dwellings to go alongside the obvious (and more traditional) fun elements that still exist. The Independent article citing a poll from Unite Group which revealed that 87% of students wanted peaceful surroundings as part of their accommodation, versus 56% who were after hard partying nightlife.

Healthy Returns

Trends over recent years have shown that student accommodation has certainly become a property market with the potential for healthy returns on investment, with figures suggesting at least parity with more traditional by-to-let opportunities. Property Investor Today suggesting that average annual yield in the market being somewhere between 5 and 8%. Interestingly though, and a reason that now might indeed be a good time to invest in student accommodation is that comparatively few investors have yet to get involved in this potentially ripe market.

Gareth Hill 7th February 2016 Student Property Investment

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