The student housing sector in the UK has continued to grow in the early stage of 2018, with investment totalling £975 million in Q1 of 2018, following on from a strong 2017. Last year saw a total investment of £4.68 billion throughout the year, with the UK cementing itself as one of the leading student property markets in the world. As investors from across the globe continue to invest their money in the UK’s student property market, the market has started to evolve with demand, creating innovative examples across the country for operating models and room types.
The UK Student Housing Performance
Data shows that, of 201 schemes and 58,883 bed spaces, there was a total return of 9.58% in the 12 months leading up to September 2017, whilst the nation saw an average rental growth of almost 3%. The student property market is continuing to perform well, bringing in extremely strong investment across the board from various types of investors, whilst the market is witnessing larger operator purchasers and portfolio sales. Real estate advisor, CBRE, suggest that a select few operators have dominated the market over the last 12 months, with the CBRE operator league table showing that Unite Students, UPP Ltd, IQSA and Liberty Living control or own 45% of the 290,000 bed spaces controlled by the top 24 operators, with 80% controlled by the top 10 operators.
The head of student accommodation at CBRE, Jo Winchester, said: ‘The market consolidation is being driven by the continued desire for operating cost savings and increased market share and perhaps enhances brand awareness in certain towns.’
Following an indication that there will be a focus on making student property more affordable for the student body, Jo Winchester also went on to say: ‘The desire for cheaper accommodation is beginning to drive innovation in room types and hybrid operating models. In terms of construction, we are seeing creative alternatives to the classic en-suite layout which are both cheaper to rent and cheaper to build, we are also seeing the return of modular construction methods.’
The Impact of Brexit
It is a well-known fact that Brexit has had some form of impact on the property market in the UK, and although it may continue to have an impact, the student property investment market is likely to be able to stand firm against any potential issues, more so than other UK property market.
Jo Winchester commented, saying: ‘The weak pound continues to attract students and investors from outside the European Union, though the impact of potentially reduced research funding from the EU does remain a concern for universities. The potential for rental growth remains good and the general shortage of investors compared to opportunities tends to support values and the market overall is improving, especially in London and prime regional towns,’
The Best Places to Invest in UK Student Property
When investing in student property and considering the finances that make up your investment, there are a variety of elements that you need to consider. However, two of the most important figures to be aware of, especially when deciding where your investment should be, are the cost of the property and the rental yield that you may be able to achieve. By looking at these two figures, you are able to get a better understanding of how profitable an investment opportunity may be. With this in mind, we have looked at the affordability and the rental yields of different universities, with a top 10 for each to help you to understand the best places for UK student property investing.
Rental Yields – The best university town in terms of rental yields is currently Nottingham, where the average rental yield averages at 8.56%. The remainder of the top 10 towns by university for rental yields are:
• Leeds University (7.80%)
• Queen’s Belfast (7.50%)
• Coventry University (7.43%)
• Glasgow University (7.31%)
• Manchester University (7.16%)
• Swansea University (7.08%)
• Birmingham University (6.82%)
• Aston University (6.82%)
• Portsmouth University (6.59%)
Affordability – The best university town in terms of an affordable property purchase is Durham, where the average house price plus stamp duty is £105,418. With additional stamp duty costs taken into account, the remainder of the top 10 towns by university for affordability are:
• Dundee University (£122,729)
• Queen’s University, Belfast (£123,961)
• Glasgow University (£127,317)
• Nottingham University (£137,376)
• Swansea University (£144,888)
• Keele University (£150,198)
• Lancaster University (£153,630)
• Sheffield University (£157,045)
• Derby University (£157,253)
For more information on UK property investment or to enquire about the latest property investment opportunities, please contact Hopwood House.