Since 2011, student accommodation has become a popular investment sector with increasing student numbers, fixed rental returns and an easy-to-understand concept. Today, Purpose-Built Student Accommodation (PBSA) in the UK continues to tempt wealthy investors and sovereign wealth funds. The UK PBSA market itself is currently worth £46 billion according to Knight Frank estimation back in 2017. But with the Brexit threatening to cut the numbers of high-spending foreign students, why do these high-profile, educated investors continue to jump to the opportunity?
Student numbers continue to grow
Contrary to popular belief that less foreign students will opt for Britain to receive their higher education qualifications; the British Council predicts that the number of international students is set to double to 8 million by 2025. In June 2013, the statistics provided by UCAS confirmed that the number of applications increased by 3.1% overall compared to the previous year with the biggest percentage increase in applications coming from non-EU applications, particularly places like Malaysia.
With numbers like these, the future looks prosperous for the UK despite Brexit concerns. Given the sustained upward trajectory of university student numbers, investing in student accommodation could be less effected by external factors which could influence other property investments such as the traditional buy to let.
Demand outstrips supply
With the increasing student population and the globally recognised universities available in the UK, students from all over the world will continue coming, creating a high demand for rooms. Research suggests that at least 300,000 more rooms will be needed in UK universities across the country.
But it is not just the arrival of international students that are driving the market, the number of domestic young people in the country going into higher education is on the rise. The number of young people aged 20 looking to get a university degree has increased by nearly 25 percent since 2006.
But why the need for a Purpose-built student accommodation when there used to be so many landlords offering to let out their houses in the suburbs to students as oppose to families? This all comes down to the changing demands of the millennial mindsets. In today’s world the shared house stripped down to the basics is just not enough! Young people lean towards branding as well as comfort which newly built PBSAs offer along with the promise of a modern space with learning and leisure facilities and of course, unlimited wifi.
Student accommodation offer high yield investments
Investing in student accommodation as a property investment offers investors a very good rental yield and property investors are generally investing into a very stable “income generating” scheme. To get a lease, students are generally required to provide a guarantor, which ensures that rent is paid on time and in full.
To add to that, managing a buy-to-let investment these days can be a hassle, especially when your tenants are students. When you take into consideration all the maintenance and management of the tenants. Investing in student accommodation is hands off as the block is managed by professional management companies.
Invest in student accommodation through crowdfunding
So, if you are undecided about where to invest in property in the UK, Shojin Property Partners recently launched this exciting property investment opportunity scheme in the popular university town of Nottingham on its property crowdfunding platform. The development consists of 124 studios and is minutes away from the campuses in Nottingham. A student accommodation of this scale was of such popular demand that all the units were snapped up before the building was even completed.
The building is estimated to generate almost £1 million per year in rental income and, after all costs and taxes, provides investors with over 5% dividend yield. Overall annualised return on investment is expected to be 10%-12% per annum over a period of 3 years.