Student Accommodation Investments

Student Accommodation has rapidly become the UK’s number one asset class for investors looking to achieve consistent high yields and an entirely hands-off investment.

Student group socialising

CURRENT STUDENT INVESTMENT OPPORTUNITIES

Investing in UK Student Accommodation

With the majority of Universities in the UK struggling to provide enough high quality accommodation to their students each year, and now with the introduction of Article 4 areas and licensing issues surrounding HMO’s, Purpose Built Student Accommodation is becoming an ever-popular investment for investors across the globe, without the additional stamp duty costs now associated with residential buy-to-let.  .

 

The UK is typically seen as home to some of the best Universities in the world, with the second highest level of applications for places, behind only the USA. The Russell Group Universities (the leading 24 Universities in the UK) have almost 1/2 million under graduates and ¼ million post-graduate students enrolled each year. These Universities and cities are unable to meet the current demand for housing, which is why Purpose Built Student Accommodation has taken off so rapidly. In total in the UK there are over 2.3m students, increasing on average by 2% per year, and currently the number of PBSA properties can only house around 20% of the student population, with the rest having to live in low quality, bad location properties.

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Games room at the Natex Student Development

Student Accommodation is also one of the few asset classes that can claim to be virtually recession proof – performing well through the 2008 financial crisis. The reason for this is that universities continued to receive record levels of applications year on year, creating consistent demand from students for high quality accommodation, and continues to do so until this very day, and will continue to do so for many years.

 

Investors in PBSA will purchase a studio, or entire apartment (comprising of multiple pods and shared communal facilities – kitchen/living room), on a leasehold basis, typically 125 years, receiving full legal title, all registered with the Land Registry in the UK.

 

Investors then sign a management agreement with the operating company of the building, who will most likely pay a rental guarantee for a fixed period of time – it is standard for the rental guarantee period initially to be 5+ years. This provides an entirely hands-off investment for the investor.

When the time comes for the investor to sell, they can either sell at the price they paid for the property, keeping the yield for the new investor the same, or they can do what is sometimes known as yield compression. This involves increasing the price of the apartment, which brings the yield down. Some may think a secondary investor wouldn’t invest at a lower yield – however there are many investors happy to take a lower yield as they will be purchasing a completed, ready cash flowing asset, with a proven track record, rather than investing off-plan and having to wait a year or two in order to see their returns.

 

PBSA is a great part of any portfolio, offering this guaranteed stable income, however it is worth noting that there is currently no mortgage financing available for this asset class, meaning investors are required to invest with cash only.

Liverpool student investment property
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