The Student Accommodation market is awash with investment opportunities and lots of claims to have the best investment out there. But what are the facts?
Student Housing Investment-the demand?
Purpose Built Student accommodation is a buoyant sector. Record levels of money are being invested into student housing, with over £4.2 billion in the first part of 2015, way ahead of 2014. Student fees have not stymied demand. First introduced in 1998, fees have risen from £1,000 to the introduction of variable fees in 2004 to the controversial £9,000 cap in 2012.
The sector had part of its origins in the Business Expansion Scheme of the late 1980s and the listing of Student REITs on the London Stock Exchange. Now the sector attracts global institutional investors. In some respects its ascendancy is akin to the dynamics in the broader residential and buy-to-let market, where restrictions on supply, coupled with strong levels of demand, have generated a growing and profitable sector.
Whilst there is plenty of appetite for this type of investment, it pays to be vigilant with where to put your money. There is always the supply-demand dynamic to take into account and ensure there is pent-up demand for students wanting this type of accommodation. A key metric is the number of full-time students.
And what about the future for student property?
UK student numbers have been growing, in spite of initial concern over the introduction of the higher £9,000 cap on tuition fees in 2012. Universities and Colleges Admissions Service (UCAS) figures show a continuing upward trend in student numbers in 2015 and for 2016, with a robust rise in international student recruitment.
Knight Frank Global Research estimates an annual growth in student numbers of four per cent for the next five to 10 years.
Which cities to invest in for Student Property?
And here a Savills league table of future development potential for purpose built student housing helps. It exposes the top spots for this type of investment, hinged on the leading UK university cities.
Top of the table are: Bath, Bournemouth, Brighton, Bristol, Cardiff, Edinburgh, Kingston upon Thames, London, Manchester, Oxford and St Andrews. The next tier includes Aberdeen, Belfast, Birmingham, Cambridge, Canterbury, Chester, Chichester, Coventry, Durham, Exeter, Glasgow, Leeds, Plymouth, Portsmouth, Sheffield, Winchester and York.
It pays to invest near Universities of a certain calibre, given these will persistently perform better in challenging times and there tends to be a flight to quality for students and investors alike.
Purpose Built Student Accommodation – Yields and returns?
Some purpose built residences offer peace-of-mind with assured returns. At one level that inspires confidence, particularly to overseas investors, or even for a long-distance UK investor. But there needs to be a persistent level of demand that can provide assurance it is a self-standing investment, which won’t topple over once any ‘guarantee’ ends.
PBSA Tax advantages over buy-to-let?
Here’s an enticing and exciting prospect. PBSA has advantages over standard buy-to-let, given there are now 3% SDLT ‘Stamp Duty surcharges’ on second home purchasing for UK residents. It is not anticipated that this type of investment will attract this additional tax.
In conclusion once you are satisfied over the level of demand, you then need to consider the centrality of the location. Is it near the campus and all the amenities and how far from the town or city centre? And what about having an experienced and professional management company in charge?