Student accommodation; is it worth investing?

It’s that time of year again: A-level results… Arthur takes a look at student accommodation and potential prospects for investing in this area of the property market.

For an increasing number of students who received their A-level results on Thursday, university is the next step. UCAS calculates that as of midnight on the 18th August, 424,000 students have already been placed in UK higher education- that’s a 3pc increase on 2015- and it doesn’t yet include all those still going through the stressful process of clearing! UK universities are expanding. Year on year an increasing number of both UK nationals and foreign students are attending our higher education institutions. All those who have decided to move away from their hometown will have to live in student accommodation for the duration of their studies.

Most students tend to opt for university halls or private halls during first year and move into private lettings (or shared houses) for the remainder of their time at university. Whatever their choice of accommodation may be, the fact of the matter is that more students mean an increasing demand for student accommodation.

It seems every city with a university is currently seeking multi-million pound investments into student accommodation.

The University of Bristol recently added 241 rooms to their popular Stoke Bishop campus, Birmingham university’s latest phase of development will add 300 new student rooms by 2017, and Bath has an on-going £43 million project to add 708 en-suites to their existed student accommodation (just to name a few of the student accommodation development projects). Private developers are following suit in areas where the universities themselves are expanding. There is an increasingly high demand to buy land in order to develop purpose-built student accommodation. The biggest names in private halls include Unite Group and Vita Student, but the market is filling up with other large developers who offer student accommodation ranging from affordable to luxury in all major university cities.

In London, evidence shows that there is actually a shortage of student beds in relation to the number of university students living in the city. Other cities following in this trend could prove to be the best areas for investment because there is guaranteed demand.

It seems that any investor with liquid capital seems to be allocating it to student property development. Even though the removal of student caps in the UK has lead to a surge in student numbers, investors need to be certain that their local market is not saturated before they build high-end student accommodation. Other profitable options include investing houses used for private student lettings, although these rent prices tend to be significantly lower than the more modern purpose-built rooms. Arthur recommends that investors thoroughly research the quality, location and price of the existing supply in the region before jumping in.

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