Student property experts are warning investors to steer away from buying in cities with ‘low status’ universities.
Property consultants Savills claim investors face a bleak future of falling student demand if they let property near universities that have limited growth prospects as their popularity declines in the face of increasing tuition fees.
The firm has divided the UK’s universities in to ‘top”, “upper second class” and ‘lower’ tier institutions, with established centres of learning like Oxford, Cambridge and St Andrew’s among the 24 in the top brackets - the rest are described as low status.
The report discourages investment near low status institutions, saying: “Opportunities for development and investment in purpose-built student accommodation may still exist but would need to be focused on the best location, or offering high initial yields and returns, because future growth potential is more limited.”
The firm explained that the best universities that have an “international appeal and reputation for academic excellence” will continue to flourish.
Marcus Roberts, Savills head of student investment said: “The top-tier universities are expected to continue to attract demand, while charging maximum fees. This will maintain the competitiveness of these institutions, compared to the rest of the UK.
“We anticipate that funders, developers and investors will wish to target future growth in these locations. Investment is possible in most locations but target initial returns have to be significantly adjusted in view of future growth prospects for different towns and cities.”
Private student landlords are likely to benefit from this ongoing popularity because the most sought-after universities are likely to face a shortage of purpose-built accommodation for many years.
Many professional student property investors also suggest not linking properties to universities, but to opt for homes near transport hubs instead.
That way, the appeal of a property is not tied to the success or failure of a specific institution to lure students but can be switched to other markets, like single professionals.
