Recent research by Mistoria Group, specialists in student property investment, has highlighted the speed of growth in the student property market. The findings of the research also underlined the high level of returns that student property currently tends to deliver, particularly in the North West.
The average rental yield for student properties across the UK this year was previously forecast at 6.37%. However, the report showed that in the North West of England’s student property sector across the first three quarters of this year, rental yields were significantly higher at 13%. Compared to the wider buy-to-let market in the UK at present, student property yields are around 5-6% higher. Between April and June this year, gross rental yields across the whole buy-to-let market showed levels of 6.2%
The report also showed significant growth in the sector, with 8% year-on-year increases for gross cash rental yields on student properties in the North West. Over the past five years, this represents a rise of 22%, making it one of the UK’s fastest-growing investment property markets over that period. It has also shown itself to be an exceptionally healthy market over recent years as a whole. Property values, as well as rental yields, have tended to either remain steady or increase over the past few years.
Mistoria Group managing director Mish Liyanage said that “Investing in student accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties than a comparable BTL property in the same city.”
A number of factors lie behind the healthy growth of the student property market. One of them is the demand pressure that comes from a rapidly-growing population of students in the UK. More and more domestic students are applying for university places, and the number of international students coming to the UK is also on the rise. This year, UCAS expect to see a record-breaking half a million applications. The number of university places on offer is also increasing. 2014 saw 30,000 extra places made available by UK institutions.
However, while once students were happy with just about any “digs” they could get their hands on, capturing a slice of today’s demand often requires some commitment to quality. According Mish Liyanage, “Students will pay more for high quality, well-maintained accommodation than for the traditional rundown and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation.” Liyanage went on to say that “Our recent research shows us that the vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills.”
It seems that investors are increasingly catching onto the opportunity that student property – once something of a niche investment type –can represent. £2 billion were invested in the sector last year, according to the Mistoria Group’s research, and the total volume of activity has risen significantly over the last couple of years.
This article first appeared on NuWire Investor on 27th October 2014.