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Is Student Property A Good Investment In 2024?

Is Student Property A Good Investment In 2024?

As the UK property market gears up for 2024, investors are eyeing lucrative opportunities, with student accommodation investments taking the spotlight. According to Lender Together's predictions, there's a projected 50 percent surge in buy-to-let lending over the next five years, with student-let HMOs leading the charge. This trend isn't surprising considering the growing demand for housing in cities hosting universities. With record student numbers, the appeal of student accommodation investment becomes evident, offering higher yields and reduced vacancy risks. In this article, we'll delve into why student accommodation investment is gaining traction and explore its potential in the UK market for 2024.

What is student property in the UK?

In the UK, student property refers to accommodations specifically designed for students attending universities or colleges. This includes purpose-built student accommodation (PBSA), HMOs, and flats and apartments located near campuses. With high demand from students and stable rental income, investing in student property offers attractive returns, making it a promising investment option in 2024.

What are the types of student properties in the UK?

When considering student accommodation properties in the UK, there are several options to explore. These include:

Student Boarding Houses: These provide tenants, often university students, with rooms for short or extended stays, offering room and board facilities.

The average rent ranges from £290 to £400 per week.

Student Rental Shared Apartments: Ideal for new students, shared apartments offer affordable living arrangements where students can share communal spaces. 

The average weekly rental cost of a shared room in purpose-built student housing is roughly £123.96.

Student Homestay Options: Homestays allow international students to live with local host families, providing an immersive cultural experience. 

The average rent for foreign students is around £77 per night, although finding such accommodation can be challenging without local recommendations.

Purpose-built Student Accommodations (PBSAs): PBSAs are increasingly popular among students for their student-specific designs and amenities. They offer various options, such as en-suite rooms, studios, and shared apartments. 

The average rent starts at £99 per week.

Houses in Multiple Occupation (HMOs): HMOs are another significant aspect of student accommodation in the UK. These properties house at least three tenants, forming more than one household, sharing facilities like bathrooms and kitchens. Particularly favoured by students, HMOs offer a sense of independence and communal living, often at more affordable rates. Investors eyeing student accommodation investments should consider including HMO properties in their portfolios owing to their popularity and potential for rental income.

Understanding these types of student accommodation properties can help investors assess student accommodation investment opportunities in the UK.

Demand for student housing in the UK

The demand for student housing in the UK continues to be robust, driven by various factors:

  • The UK student population is currently at its highest ever level, with strong demand for purpose-built student accommodation (PBSA).
  • The Office for National Statistics forecasts a 5% increase in the population of 18-year-olds in England, translating to approximately 30,000 additional people in 2024.
  • Despite a slight decrease in acceptances compared to the previous academic year, university acceptances remain 24% higher than pre-pandemic levels in 2019.
  • Demand from international students outside the EU is increasing, with a 4% year-on-year rise in applications, reaching 116,000 for the 2023–24 academic year.

Moreover, there has been a shift from higher to medium and lower tariff universities because of falling A-level grades and tighter entry requirements. We expect this trend to drive additional demand for PBSA beds in areas where these universities are located.

Projected Demand for Student Housing in the UK

Here’s a visualisation of the full-time student population in the UK and projections for future demand:

Is Student Property A Good Investment In 2024The Higher Education Policy Institute projects that in order to meet demand, an additional 358,000 university places will be required by 2035.

The UK continues to need adequate accommodation solutions due to the strong demand for student housing and the projected increase in university participation rates.

Investment Outlook in Student Properties in the UK

 

Is Student Property A Good Investment In 2024

 

Investment in student properties in the UK continues to be an attractive investment strategy in 2024, driven by ongoing trends and market dynamics.

  • We expect investment activity to remain robust and potentially improve further in 2024.
  • The sector is characterised by strong operational metrics and a positive return outlook.
  • High occupancy rates persist, with schemes maintaining high booking levels, supporting optimistic rent growth projections.
  • Forecasts suggest rent growth of 5% or more for the 2024–25 letting cycle, indicating a favourable investment climate.

Projected Investment Outlook for 2024

Supply Shortfall: Since 2019, the growth rate of student accomodations has decreased significantly, with an annual increase dropping from 36,000 in 2019 to just 12,000 in 2023. As a result, there is a huge shortfall predicted around 490,000 beds by 2026.

Market Dynamics:

Rising Rents: Student rents have been on the rise, increasing by more than 10% year on year against a backdrop of 6.7% inflation during the 2023–24 academic year.

Ownership Landscape: Private operators oversee nearly 80% of all student beds, with universities and private providers also contributing to the supply.

Investment Prospects:

Bullish Market Fundamentals: Despite challenges, the fundamentals of supply and demand for operators remain strong, driving unprecedented rent growth. Early signs indicate significant increases in rent expected in 2024–2025.

Attractiveness: Investment in UK student properties remains attractive in 2024, supported by robust market demand and favourable investment conditions.

Despite challenges like stringent planning requirements and the need for modernization, investment in student properties in the UK will remain attractive in 2024, supported by strong market demand and favourable investment conditions.

UK Student Accommodation Market Size (2024-2029)

Market size (2024): USD 8.52 billion

Market size (2029): USD 11.11 billion

CAGR (2024–2029): 5.45%

Key Insights:

  • Despite COVID-19 challenges, the UK student accommodation market remains resilient.
  • In 2021, 45% of individuals aged 18–24 were enrolled in education, indicating steady demand.
  • In 2020/2021, sponsors issued 428,424 study visas, demonstrating recovery and demand resilience.
  • Confidence in the sector is evident through increased investment in projects and infrastructure upgrades demonstrates sector confidence.

Market Trends:

  • A growing number of students aged 20–24 contribute to a strong customer base.
  • The UK's reputation for quality education attracts international students, supporting market growth.
  • Increased enrollment rates among students aged 18–24 reflect ongoing demand for education.

Overall, the UK student accommodation market demonstrates stability and potential growth, driven by sustained demand from domestic and international students, alongside continued investment in educational infrastructure.

Key Considerations for Investing in UK Student Accommodation

Before diving into student accommodation investments in the UK, it's crucial to thoroughly evaluate several key aspects to maximise your chances of success in this dynamic market.

Prime Location Selection:

  • Opting for properties situated in strategic locations near university campuses is paramount.
  • Proximity to public transportation hubs and amenities such as supermarkets and entertainment venues adds value to the investment.
  • Considering areas with a high concentration of students and a vibrant social scene can significantly enhance the property's appeal.

Investment Protection Strategies:

  • Implementing measures to safeguard your investment is essential, given the transient nature of student tenancies.
  • Prioritise properties with durable fixtures and quality finishes to minimise maintenance costs and attract long-term tenants.
  • Exploring purpose-built student accommodation (PBSA) options offers reliability and ensures a higher standard of living for students.

Future-Proofing Your Investment:

  • Anticipating future trends and developments in the local market is key to sustaining long-term profitability.
  • Stay informed about urban regeneration projects and economic trends that could impact the demand for student housing.
  • PBSA investments are gaining traction due to their resilience and potential for consistent returns, making them a viable option for forward-thinking investors.

Enhanced Amenities and Facilities:

  • Providing modern amenities and conveniences can set your property apart and attract discerning student tenants.
  • High-speed internet, communal areas for socialising, and access to fitness facilities contribute to the overall appeal of the accommodation.
  • Investing in properties that offer more than just basic housing options can lead to higher occupancy rates and increased rental yields.

By carefully considering these factors, prospective investors can make informed decisions and capitalise on the opportunities presented by the thriving student accommodation market in the UK.

Managing Student Properties in the United Kingdom: Essential Tips

 

Is Student Property A Good Investment In 2024

 

Regular Maintenance:

  • Scheduled Cleaning: Regular cleaning schedules maintain hygiene standards in communal areas.
  • Prompt Repairs: Swiftly address maintenance issues to prevent escalation.
  • Special Services: Offer optional services for international students for added comfort.

Tailored property maintenance:

  • Streamlined Solutions: Utilise property management services like Novyy for efficient management.
  • Proactive Approach: Conduct regular inspections to identify and address issues promptly.

Ensuring property security:

  • Burglary Prevention: Enhance security measures with durable locks and alarm systems.
  • Regular Checks: Conduct frequent property inspections to mitigate risks during vacancies.

Tenancy Agreement Management:

  • Clear Communication: Maintain transparency regarding tenancy agreements and move-in/move-out dates.
  • Deposit Management: Proper documentation and third-party mediation facilitate fair deposit deductions.

Exterior Maintenance:

  • Garden Management: Utilise lawn fertilisers and weed killers for tidy outdoor spaces.
  • Professional Assistance: Seek professional help, like Novyy, for effective property exterior maintenance.

In Summary,

Investing in student accommodation properties in the UK offers promising returns in 2024, driven by strong demand and favourable market conditions. To succeed, investors must focus on prime location selection, investment protection strategies, and offering enhanced amenities. Effective management, including regular maintenance and proactive security measures, is essential for maximising returns. Leveraging property management services like Novyy streamlines operations and ensures efficient management of student accommodation portfolios, providing investors with a strategic advantage in the competitive market landscape.

 

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