With so many real estate investment opportunities available in countries all around the world, it is important to understand investment trends both domestically and overseas, to try and help real estate investors find a high-yield opportunity.
This article looks at the growing U.K. student property market, which has risen in popularity in recent years. With more and more international students flocking to prestigious U.K. universities in cities like Manchester, Liverpool, and London, student property represents a fantastic opportunity for overseas investors.
A new report by broker Knight Frank has claimed that student rents will rise by 3 percent next year. The report also highlighted some of the most undersupplied student housing markets in the country, namely London, Edinburgh, Bristol, and Newcastle.
This will come as welcome news to many investors in this market, as the past year has been an exceptionally difficult one.
In 2012 a significant drop was seen in student numbers after a high profile, near tripling of tuition fees was combined with an overhaul of the funding system. As well as putting off many prospective university students, these moves prompted some universities to reduce the number of offers made to new undergraduates.
This climate contributed to a number of difficult adjustments in the market. Growth levels fell to 1.6 percent, the market’s third largest player Opal went into administration, and major operator Brandeaux ceased meeting redemption requests.
However, the market now seems to have largely recovered. Student numbers are back up, and Opal’s 1 billion pound portfolio is up for sale and attracting fierce activity from bidders.
The focus of Knight Frank’s report was “purpose-built student accommodation.” These are larger developments, often similar in many ways to a university’s own halls of residence, and tend to fetch premium prices.
They are often rented to international students, as this market tends to look for accommodation in better locations and of higher quality.
Knight Frank expects to see significant growth in this area for a number of reasons. Britain is an increasingly popular destination for international study, and market share is rapidly increasing.
Furthermore, councils tend to see student developments as unprofitable and even undesirable, creating a difficult planning environment that will work in favor of existing property as demand increases.
The largest operator of purpose-built student accommodation is Unite Group (UTG). For this operator, recent market developments, in particular the successful sale of Opal’s portfolio, are certainly good news.
Things are a little more mixed for buy-to-rent landlords, however.
They can certainly expect to benefit from the growth of the market, but as student accommodation increasingly attracts the interest of international investors there is a danger of newcomers snatching some of their market share.
All in all, however, the report’s findings are certainly good news for the whole student investment property market. At present, this is a market dominated by international investors, particularly those based in the Far East.
However, interest from U.K. investors is rapidly increasing and has swelled in the past several months.
The fact that much of the purpose-built student accommodation market is made up of overseas students also bodes well, as the government actively courts an increase in international students coming to U.K. universities.
As such, the number of international students looking for purpose-built housing looks likely to increase over the coming years, boosting the health of this sector.
Pure Student Property is a U.K. student property specialist, providing investors with real estate opportunities in the U.K. student market, with a return of up to 10 percent guaranteed for two years.
