When it was announced that the UK was leaving the European Union, doubt was cast over whether the United Kingdom would still be an attractive place to study. There were concerns over whether EU students would have to pay higher fees, and what their status would be after they had finished their studies, and arguably this has deterred some from choosing to attend a university in the UK.
That being said, the United Kingdom is still home to some of the best universities in the world, and the dip in the value of the pound has made it more attractive for those from outside the EU to study. Considering the profitability depends upon such a delicate balance of numbers, is it still worth considering student property investment opportunities? If so, where are the best places to invest in student property?
The outlook for UK student property market remains positive and there still appears to be strong demand from institutional buyers for UK student property. For example, recently listed company Watkins Jones, has had a fifty-nine percent share price increase over the past year. The company obtains planning and builds student property developments which it forward sells to institutional investors. The pipeline of “10 student accommodation developments scheduled for delivery this year (2018) have been forward sold, as have 85 per cent of the targeted beds for the 2019 financial year”. According to the Investors Chronicle.
Brexit has not had the effect on the student property market that some people anticipated. The marginal reduction in EU student applications was more than offset by the increase in student applications from other countries such as Singapore, China and Hong Kong. This resulted in a net increase of 4% in student numbers in 2017 according to HESA.
Investors do not have to invest in shares or a student fund. Other options include studios in purpose build student property developments. On average, the studios typically cost £80,000, with the more affordable student en-suite rooms (pods) priced just below £60,000. The typical net income ranges between seven to eight percent (7%-8%) after full management and other associated costs have been deducted. The benefit of investing in studios and pods is that an experienced management company will generally handle the day-to-day maintenance, and issues such as finding new tenants and marketing the studios. This lifts an enormous weight off the investor’s shoulders, and means it is perfect for the individual who cannot dedicate a lot of time to the investment, or for those who are living overseas and cannot be physically present to undertake daily maintenance tasks.
Those concerned about the sustainability of the UK student property investment sector can draw upon the analysis provided by global real estate consultancies such as the Savills in depth report on the student market.
The report measures a number of factors including current availability of purpose-built student properties as well as the pipeline of future developments balanced against the student demand and university rankings.
The end of the year (2017) table revealed that Bristol, Leeds and Nottingham were listed in the top two tiers for student property.
“Purpose built student properties are blocks of apartments consisting of studios or cluster flats which are built with large communal areas, close to universities and have planning permission only for student usage”
Bristol attracts hordes of young people due to its high ranking educational facilities (University of Bristol is ranked in the top ten in the UK), and trendy arts scene. It has also experienced significant investment over the years such as the Bristol Temple Quarter Enterprise Zone, and as a result has a lower rate of unemployment than any other UK city. These factors likely appeal to potential students who wish to remain in the city after graduation.
Lower Ashley Road is a three-storey 78-unit development based just north-east of Bristol’s city-centre. Its location means that it is convenient for students who attend either the University of Bristol, or the University of the West of England (UWE), both of which are reachable either on foot or via direct public transport links. Investors can purchase a unit in Lower Ashley Road, with prices starting from £89,950 and an 8% net yield is guaranteed for three years.
Collectively, the universities have over 51,000 full time students enrolled in various degree programmes, yet can only provide accommodation for 7,000 of them. This means that there is a reliance on independent student developments, such as Lower Ashley Road, to accommodate the remaining students. The demand is so high, that the developer is assured the units will remain tenanted and is guaranteeing an 8% net return for three years.
Home to over 70,000 students, Nottingham has one of the largest student populations of any city in the United Kingdom. It is ideally located in the middle of England, and its strong transport links makes it easily accessible from most other parts of the United Kingdom.
It boasts a £12bn economy, making it the economic capital of the East Midlands and £1bn has just been invested in transport links and infrastructure.
Article 4 direction has been adopted in Nottingham for the past six years. Article 4 direction prevents family homes being converted to houses of multiple occupation. Thereby restricting the supply of student housing. Where demand has continued to grow, prices have continued on an upward trajectory much to the delight of Nottingham landlords. Overseas investors can also benefit from the undersupply by considering Nottingham student property investments such as The Laceworks.
Investors, both UK based and overseas can take comfort in the fact that the property is fully managed by a company called SFM student who have a 100% track record across their portfolio.
Leeds is ranked in the top tier for student property demand. The vibrant city attracts a cosmopolitan crowd and has been in ranked in the top 5 universities for media and communication studies since 2014.
Leeds has one of the most diverse economy of the all the UK’s main employment centres. In 2016, Leeds saw the fastest rate of private sector jobs growth of any UK city and has the highest ratio of public to private sector jobs of all the UK’s Core Cities.
Marks and Spencer’s was founded in Leeds. Back in 1884, Michael Marks opened up his penny bazaar stall in Leeds Market before enlisting the help of Tom Spencer a decade later. Soon after, they moved to a permanent spot just around the corner and the rest, as they say, is history.
Students staying at Trinity Hall can visit that very same market today. Trinity Hall was built for students in 2015 and has a proven income stream for the past two years. Investors seeking immediate income of £7,600 could purchase a resale student property in Leeds through One Touch Property. Or contact us today to find out more information regarding the best places to invest in student property. To learn more about this asset class, download our student accommodation investment guide.
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