Student accommodation has long been regarded as a relatively niche asset class. However, it has experienced a huge upsurge amongst investors over recent years. During the financial crisis in 2007/2008, the student property market remained resilient whilst most other asset classes decreased in value. Remaining strong, student property created a reliable income stream for investors. International investment has been instrumental in this booming sector as investors from all over the globe are choosing to entrust their money into British soil.
In 2017, £5.3 billion was predicted to be invested in student accommodation, with £4.5 billion in 2016 and £6 billion in 2015. These figures led investors to feel confident in the profitability of student accommodation therefore are willing to invest heavily. Students ensure there is a constant demand for student housing, which cannot be met by just universities alone. The high demand and low supply teamed with strong rental returns make student accommodation sustainable and lucrative; an opportunity that discerning overseas investors cannot miss.
Capturing the attention of investors worldwide, student accommodation offers a multitude of benefits and often presents a safe investment. Investors can buy a range of units across numerous cities to diversify their property portfolio. Diversifying your property portfolio is strategy that helps to minimise risk. If one market in an area is struggling, often other successful investments can help keep the total return on investment from falling as the prosperity brought from one transaction can outweigh the poor performer.
The UK is home to first class universities which are a magnet for attracting a wealth of new students each year, therefore there is currently a gap in the market for high end student accommodation. Overseas students make up for a large proportion of those seeking purpose-built student accommodation. RW Invest, property investment specialists released a 2018 market report which states,
“Despite the general level of uncertainty, premium levels of education and favourable exchange rates have established the UKs power to secure overseas students moving to the UK to study and these figures are set to increase further. IN a breakdown of the current student population, 81% are from the UK, whilst 13% are from outside of the EU and 6% are from within the EU.”
International investors increased their share of the student property market from 35% in 2015 to 64% in 2016 with a large proportion from the Far East. Huge transactions have been made around the country leaving forecasts in student housing to rise by 17% in 2017. Even with a surge in investment, demand is still heavy, and far outstripping supply. There are currently three students for every bed space available as UK universities are failing to keep up with creeping demands, therefore private companies are filling in the gaps. Student accommodation is adapting to cater for the strain on housing.
Demand is positive for overseas investors are they can be confident tenants require accommodation, particularly with a new class of students joining the market year after year, with many staying on for work or post graduate studies. New developments are changing the UK’s skyline as construction is occurring upwards, not outwards, due to the limited space on ground. Student housing builds accounted for 11% of all new residential projects in the UK, proving that it is a perfect time to invest.