UK investors are increasingly looking at student apartment buildings to make money out of bricks and mortar, according to property consultancy Emerging Property.
The firm believes that considering the unpredictability and expense of the residential property market, this type of property is becoming a popular choice to avoid the whims of the economy.
The UK has a student population of around 2.3 million. However, there is only enough living space to house 26 per cent of them.
It is often assumed that these student apartment buildings belong to the universities, when in fact most of them are being built by the private sector, available to ordinary investors.
According to the Financial Times, these student rooms have consistently been providing the highest yield for the last six years.
While there are numerous student towns throughout the UK, it is no longer enough just to have a university. The level of undersupply varies from city to city, with many of the most accommodation-starved locations in desperate need of new developments.
Emerging Property has identified the top five UK towns which comfortably meet the criteria for investment hotspots.
The local economy is booming in Bradford, outpacing Liverpool and Manchester. The university has plans to increase the student population by 30 per cent come 2024. However, only 17.6 per cent of Bradford’s students have a dedicated student apartment – leaving nearly 19,500 to make other arrangements.
There is a student accommodation deficit of 76.5 per cent in Huddersfield, with just 4,608 purpose built rooms for 19,620 students. As the town is rated the best in the UK for international students, future occupancy is a dead cert, says Emerging Property.
With GBP190 million invested in both of Leicester’s University campuses, demand for student accommodation in the city means there is a ratio of 6.4 students to every dedicated room.
Loughborough is consistently the most popular first choice for prospective UK students, the appeal of this top 10 university ensures high demand in a critically undersupplied city, says Emerging Property.
Stoke-on-Trent boasts the UK’s second-fastest growing economy outside London over the last five years. With 22,700 students across two universities chasing just 4,799 student units, there is a huge undersupply of 79 per cent.
These university towns are home to student properties which offer sector-high yields of 8 to 10 per cent NET. These are predetermined, contracted and fixed for 10 years.
With many of the developments consisting of multiple units, the initial site purchase can be spread between a number of investors, meaning the properties can be as little as GBP45,950.
Furthermore, as the government is keen to encourage dedicated student accommodation, it is classified as commercial property and therefore exempt from Stamp Duty below a threshold of GBP150,000.
James Harrington, business development manager at Emerging Property, says: “These properties are professionally managed onsite 24/7, meaning that all the hassle of traditional buy-to-let landlordship is taken out of their hands – letting, vetting, maintenance, repair and rent collection. Once you’ve signed the contracts, there’s nothing more to do.”