Invest in student accommodation - the best asset class
AFS Team·24 November 2014·4 min read
Many investors are aware that buying a property to rent out to tenants is a very popular way to boost income since demand for rental properties, particularly in the south-east of England, is continually growing.
However, when it comes to analysing the sector with the best yields and returns, the most lucrative type of property for investment is in student accommodation.
Enjoy higher yields in student accommodation
One reason for doing so is student numbers are steadily rising, there was a 7% increase in 2013 and there are now more than 2.3 million students in the UK. This number, particularly with better-off students from abroad taking up post-graduate courses, is set to grow further.
As with most investments, location is crucial and many potential investors should take a closer look at university cities such as Liverpool, Manchester and Chester.
The reasons for doing so are clear; all three cities have large student populations - there are more than 50,000 students in this area.
It also means that there is a chronic undersupply of student accommodation which means the rent being charged is above the national average.
Generally, all university cities in the north of England and in Scotland offer better returns than those in the south because property is cheaper and rents are high.
Student population grows – and they need somewhere to live
The National Union of Students also says that last year only one in five students were housed in University accommodation with the remaining 80% either living at home (26%) or in private rental property (51%).
Real estate firm Knight Knox International says that investors are becoming interested in student accommodation for several reasons which include:
• minimal risk because of high rental demand
• generally higher yields because of high rental growth
• student studios and pods are cheaper investments than one bed apartments
A spokesman for the firm explained: “Because of these and other reasons, student accommodation is now one of the world's fastest growing asset classes.
“Housing experts Savills said in their Student Housing Report that the world student housing sector saw a high of £4.6 billion being invested in 2013.
“Growing demand from investors means the market is truly thriving with investors benefiting from increasing rental growth because of growing tenant demand.”
He added that there was also regional growth being enjoyed in the UK for student tenant demand, the average is 2.75% and in London it's 3%.
This means that rental yields are also on the rise and the return on investment means that student accommodation offers more than most other asset classes.