There are many different submarkets in the UK property sector whether you are looking for buy to let, newbuilds, redevelopments or HMOs to name but a few. Sometimes we are in danger of making things more complicated than they should be and this is perhaps a reason why buying property in university cities makes perfect sense. Why reinvent the wheel?
Reduced risk of renting to students
Students are not the only tenants in town
Upward pressure on rent rates
Large and growing population
When we consider university cities we tend to focus on students alone when this is just part of the overall picture. There are many people connected to the university, aside from students, and as more and more universities look to spin-off their business ideas, this has created yet another interesting sub market. The make-up of the local population may change on a constant basis, with many people coming and going, but university cities tend to have a relatively high local population. Perfect for property rental!
Students are not an overly risky investment
While “students will still be students” many people have the wrong idea about rental risk when focusing on the student market. Student accommodation today is very different to that of years gone by, parents and students are willing to pay for better accommodation and this is reflected in the way in which students treat their rental properties. The days of students jumping ship and leaving large rental arrears have long gone, everything is paid in advance, bills are often part of the monthly rent and this has significantly reduced the risk.
Students are not the only potential tenants
As we touched on above, there tend to be large populations around university cities and this opens new markets for potential tenants aside from students. University workers, touring lecturers and the constant array of new businesses which emerge from the modern day university have created a whole new rental market. Students may be the bread-and-butter, they come and go on a regular basis and demand remains high, but many non-student tenants will be looking for long-term arrangements.
Upward pressure on rents
University cities tend to attract new business, improving services, great demand for property and this is very often the fuel required for upward pressure on rents. As with any rental market there will be a ceiling, a point at which it is too expensive for many people, but gradual rental increases are the norm in university cities as opposed to the exception. If a university has a growing reputation this will attract even greater demand which creates an environment in which rents are more likely to go higher than lower. We appreciate nothing if ever guaranteed but competition for accommodation can see people willing to pay top dollar.
Upward pressure on property values
A growing population, thriving local economy, constant demand for accommodation and to a certain extent some insulation from the full effects of recession are attractive to real estate investors. We’re not suggesting that university cities are fully insulated from the effects of recession but on average property price growth is greater in university cities than the UK average.
University cities in the UK continue to grow in population, especially those with a good reputation, attracting both domestic and overseas students. This creates intense demand for rental property and the majority of university cities see above average rent and property price growth. To a certain extent many of these cities are shielded from the full effects of recession because even in recessionary times students will continue to apply for university places in great numbers. Indeed, there is an argument that in recessionary times students are looking for the best qualifications they can get and what better place than a university with a good reputation?