UK student property continues its shift from ‘niche’ to ‘mainstream’ as £1.9bn is invested in 2016.
Over the past few years student property investment around the world has developed from a niche money-making opportunity, to a leading global asset class. According to Savills’ Spotlight World Student Housing (2016/17) report, this trend continued in both 2015 and 2016, with record levels of global investment being led by particularly impressive figures in the UK.
According to the report, 2015 was a record year with $15billion invested in student property around the world. So far, 2016 has shown similarly impressive figures, with $8billion invested in the first eight months.
The report states: “Student housing is a pioneer sector, showing us all how a niche specialist and opportunistic property investment can become part of the mainstream. It is particularly instructive to observe its transformation as it is probably the first of many higher yielding alternative sectors to benefit from a worldwide hunt for income.”
Of the $8billion invested globally in January-August, around 30% was invested in the UK. This $2.5billion of investment highlights the market’s increasing attractiveness to investors and continuing shift from ‘niche’ to ‘mainstream’ asset class.
The market attracts investment from both British nationals, as well as overseas investors. Savills describe the UK as "by far the most in-demand destination for global cross-border institutional and private capital" with over $9billion in foreign investment in the past 3 years.
There are many unique attributes making UK student property an attractive investment proposition. The sector benefits from consistently high occupancy levels, as the country’s global reputation for academic excellence attract students from all over the world. According to UCAS, record numbers of students were accepted into UK universities for the 2016/2017 academic year and, with the recent decline in the value of the UK pound making studying in the UK cheaper for international students, these figures are forecast to continue rising. This increasing number of students furthers the sector’s already substantial supply- demand imbalance, ensuring sustainability and increased profit potential for investors.
Those considering investing in UK student accommodation may be wondering where, and in what, to invest. In the past, students have spent their first year living in university-funded Halls of Residence, before sourcing their own private accommodation in their later years. However, with rising tuition fees and an increasingly discerning student population, demand is increasing for higher quality accommodation options. Students are leaving behind the run-down HMO (Houses in Multiple Occupancy), instead opting for high-quality PBSO (Purpose Built Student Accommodation) complexes, in close proximity to their university campus. Investors would be wise to turn their focus towards these high-quality purpose-built property developments, which offer the level of quality that students have come to expect, whilst typically being managed and maintained by specialist agencies. This means no additional management or maintenance costs for the investor.
Developments in cities like Liverpool and Bradford are a particularly good choice, as popular universities and growing student populations ensure demand for high quality accommodation remains high. It is for this reason that Purpose Built Student Accommodation in these cities provides an excellent investment opportunity.