Many of us who went to further education establishments in the UK 20 or 30 years ago will not be able to comprehend the enormous change which has taken place in the sector. We have seen massive investment by governments which has created enormous demand for further education places and seeded a very lucrative student property sector.
While this market continues to develop it is something new from many property investors. The statistics add up, the future potential is enormous and it is not difficult to see why over £2 billion was invested in this particular area during 2013.
Rental yields
Student accommodation nowadays tends to revolve around individual living quarters with a variety of shared communal areas. This allows for relatively high occupancy per square foot, increasing rental income, while offering an array of services to tenants. Indeed statistics show that the average yield on student property is around 5% to 6% higher than that available in the traditional buy to let market. We are looking at double-digit rental yields and due to the ever constant flow of domestic and overseas students demand is likely to grow in the longer term.
Statistics from 2014 confirm ever-growing demand for both regional and London based properties with rental growth of 2.75% and 3.00% respectively. Even though overseas students are playing a greater role in this particular area there has also been a significant increase in the number of “mature students” from within the UK.
The UK education system
Even the merest of glimpses at some of the world’s top universities will highlight the fact that the UK is very prominent in this area. This has created enormous demand in particular from overseas students with in excess of 60,000 university places made available during the financial year 2014/15. It is sometimes difficult to appreciate the quality of further education available in the UK especially when the domestic media tends to focus on negative developments and funding issues. The proof very much seems to be in the pudding and compared to overseas counterparts the UK further education system seems to be more than holding its own.
Is traditional student house sharing finished?
In years gone by many students would share houses in order to split the bills and make their funding stretch as far as possible. The situation today is a little different because as the cost of living continues to grow so do the potential risks of living with a number of housemates. We have seen instances of people leaving properties with rent arrears, evictions as well as theft and damage to personal property by housemates. While this is not the situation with all student house sharing arrangements, the cost of modern day student accommodation and the facilities they provide offer good value for money.
Student property investment
In what could be described as a “perfect storm” the ever-growing demand for student property, increasing rental yields and rising number of further education places available is attracting the interest of many property investors.