Why property investors are buying student accommodation

AFS Team·18 March 2014·4 min read
Why property investors are buying student accommodation
With large investors now piling into the student accommodation market, is this a good time for a private investor to part with their cash?

Investors are increasingly attracted to the rate of student property yields - some developers are offering a 7% yield which is guaranteed for five years - which is much higher than the average buy-to-let yield on a private property.

Indeed, universities are increasingly making agreements with property developers to build student accommodation that has levels of luxury that were barely heard of years ago.

Among them is an impressive new £17 million scheme in Exeter, Devon, which is being funded by Vita Student who are offering investors the 7% yield.

Investing in student property

The property developments offer impressive opportunities for investors looking to enjoy the boom in quality student accommodation.

To underline this fact, the Exeter scheme, which will have 161 apartments for students to rent, sold more than half within a week of their launch. The returns being offered by the developer are guaranteed because they will provide the students to rent the property though in future this process will revert back to the owner to undertake.

This impressive take-up of student accommodation is not just happening in Exeter; it’s also taking place in all of the major student centres such as Manchester, Leeds, Liverpool and Bristol.

The attraction for universities is that they get high quality accommodation which can then be rented out to students as part of a course package. In Liverpool, studio apartments can be rented from £119 per week with bills included.

Yields for student accommodation to grow

The impressive returns have not gone unnoticed by the property market and estate agent Jones Lang LaSalle says the UK market for student accommodation has rocketed in size by 125% since 2011.

It looks like the student accommodation market will grow over the coming years as more youngsters head to University to complete their education.

This trend has also been noted by property consultancy Knight Frank who detailed the prospects for the student property market for 2014 saying that prospects 'remained strong' despite recent economic downturns.

The firm also highlights that the main reason for the growth and future strength of the student accommodation market is the under supply of purpose-built student accommodation which offers higher level of quality and of a lack of university halls of residence.

Even with the huge investment currently underway into purpose-built accommodation, they say there is still a big demand for student accommodation.