WHY IS NOW THE TIME TO INVEST IN STUDENT ACCOMMODATION?

Discussion in 'General Property Investment Discussion' started by Gareth Bain, Nov 9, 2018.

  1. Gareth Bain

    Gareth Bain Member Forum Partner

    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 affected 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 opposed 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 Wi-Fi.

    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.

    From as little as £5,000 property investors can invest in this project as well as other on the Shojin property crowdfunding platform. Visit Our Products page to find an opportunity that is suitable for you or read our blog ‘Where are the current investment opportunities’.

    Visit our website & register: www.shojin.co.uk and follow us on Facebook, Twitter, YouTube and LinkedIn for all property related news, tips and updates.
     
  2. diyhelp

    diyhelp Active Member

    Are there any up and coming university towns you would recommend? I have read about this strategy in the past which has worked very well in places such as St Andrews.
     
  3. FWL

    FWL Member

    I would tend to stick with the established Universities - if it aint broke why fix it?

    I was thinking the only threat would be the government cutting funding for education but they cant afford to reduce this otherwise they would be hammered at the ballot box (as would future governments).
     
  4. Gareth Bain

    Gareth Bain Member Forum Partner

    Research shows that student numbers are on the increase year on year. Despite Brexit next year, the UK is seeing an increase from students from all over the world and if GBP drops next year due to uncertainty, it would be even cheaper for parents to send their children to University in the UK.

    Another thing to consider is that if a Financial Crisis happens next year or the year after, more people are inclined to go to university or study for longer as there could be a shortage of jobs.

    Regarding University towns, it is always wise to put yourself in the shoes of the students. Where would you want to go as a student to study in the UK? Think of the surroundings, transport links, the reputation of the university and type of degree are all good starting points.

    To find out more about our latest student project in Nottingham visit https://www.shojin.co.uk/property-investment/available
     
  5. I lived in Manchester about 20 years ago and even then it was an up and coming university city. Would be interested to hear your views on Manchester and investment in student accommodation.
     
  6. Gareth Bain

    Gareth Bain Member Forum Partner

    Manchester is not only a great Student town but it is also one of the bigger metros in the UK. However in recent years, there has been a lot of construction works taking place in the city which has resulted in some developments struggling to be filled.

    In my opinion, I think there is a lot of stock available in Manchester at the moment and with all these new builds which have gone up in recent years, we could see foreign students buying a property in these blocks for the short term.

    That being said, there are pockets in Manchester and Liverpool where you can find opportunities. However they are a lot harder than other university towns due to the current supply.
     
  7. lookinginvest

    lookinginvest Member

    I totally agree Gareth, Manchester is one of the leading lights in the North West and indeed one of the leading lights in the UK. Not only is there a buoyant market for student accommodation but the local economy is also doing well. When the BBC moved lock stock and barrel to Salford that really put the area on the map and not only assisted local businesses but attracted new investment. I am not sure if the tram system has been extended in recent years but that is also a massive positive.
     
  8. Longterminvestor

    Longterminvestor Active Member

    Will Brexit have any impact on the University sector in the UK?
     
  9. lookinginvest

    lookinginvest Member

    Interesting point about Brexit as this would make it more difficult for EU citizens to make use of the UK university system. However, as the government has always said, they are not attempting to stop people coming to the UK who have skills (or could have in the future, via the university system) to offer. On the whole I dont think Brexit will have any impact although what about University funding, does any of that come from the EU?
     
  10. James Burton

    James Burton New Member

    Student property remains a strong asset class with great returns. Even during times of economic downturn, the student population and number of applications continues to grow. A bleak economic climate can actually prove a major push for people looking to upskill, gain a solid education and become an even more desirable candidate in a highly competitive market.
     
  11. nmb

    nmb Well-Known Member

    Hi @James Burton

    Welcome to the forum :)

    It sounds like you have invested in student property before. It would be good to hear which areas of the country you think have the best potential for student accommodation?
     
  12. Longterminvestor

    Longterminvestor Active Member

    I have been reading about Leeds and apparently it has 3 universities and is an up and coming place anyway. Any views?
     
  13. Gareth Bain

    Gareth Bain Member Forum Partner

    If Brexit is the 'doom and gloom' the masses are talking about then that means that more and more people will go to university because there is uncertainty in the market. The UCIS have already confirmed an increase of 3.1% in applications compared to previous years.

    In the short term, it is expected that GBP will drop which would mean that is it even cheaper for international students to study in the UK, especially from countries like China and Malaysia.

    This morning we launched our Student Accommodation project in Nottingham. We are very excited about this project as the 124 units have already be rented out for the 2018/2019 academic year.

    You can see more details below.

    https://www.shojin.co.uk/property-investment/available
     
  14. Longterminvestor

    Longterminvestor Active Member

    Hi @Gareth Bain

    I presume you have a number of student accommodation projects coming online in the next 12 months?
     
  15. FWL

    FWL Member

    Is there a danger of the student accommodation marketing becoming over crowded with dwindling returns as landlords begin a race to the bottom? I dont think there is but I thought it would be interesting to see what others think.
     
  16. Gareth Bain

    Gareth Bain Member Forum Partner

    @Longterminvestor We have identified this as a sector with good growth potential next year and is an area that we will be looking at to try and help property developers.

    We actually have one student development project in Nottingham which we launched a few days ago. Here is a video of our CEO talking about the project.



    What a lot of property investors and buy to let landlords have done in the past is converted their homes into student accommodation. What we see going forward is that the universities and government will look to standardise student accommodation.

    We have seen the government get a lot stricter on buy to let landlords recently to try to standardise the industry and we believe it won't take long before this happens in the student market.
     
  17. diyhelp

    diyhelp Active Member

    Will we ever see a situation where student accommodation landlords would work together with universities to promote their properties? Or is this already happening? I would assume the first port of call for a student looking for accommodation is the university?
     
  18. Gareth Bain

    Gareth Bain Member Forum Partner

    As a student accommodation landlord, I think it would be prudent to work with universities as there is a shortage of accommodation in some cities.

    However, I believe that universities and government are looking to standardise and institutionalise the property sector. They want it to be professionally run and managed. I also believe that, if done property students would prefer the social element of living with like-minded people. At the moment, this is mainly catered to international students

    However, there is a case to say that students want their independence and would prefer to live in a house with 3 or 4 others.
     
  19. Longterminvestor

    Longterminvestor Active Member

    It sounds as though private buy to let investors may well get squeezed out of this kind of accommodation in favour of big businesses?
     
  20. Gareth Bain

    Gareth Bain Member Forum Partner

    @Longterminvestor That is happening already in the Buy to Let sector. The government wants to standardise and control the property sector. With the recent tax changes, it is no longer viable to invest in buy to let anymore. This is pushing out the accidental landlords and mom and pop buy to let investors out of the market.

    This means the property investors now need to get clever about property investment. Investing through a limited company is one way of sidestepping the new tax regulations. Here you will pay corporation tax instead of income tax (this is not advised). Once the property sector becomes standardised government can regulate it which would be a good thing. This will raise the bar and the standard of accommodation in the UK.

    With a crowdfunding platform, investors can now invest (through a company) to get access to these sorts of investment opportunities. It's about coming together and working together.

    Imagine if 100 investors funded a student accommodation development which had services like cleaning, property management, social facilities. This development would drive more interest than a unit that didn't offer these services. This would mean that it would have higher occupancy as well as be able to charge a premium for all the value you are adding.
     
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