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Where is the Best Place to Invest in UK Student Property?

While the final numbers have not yet been released, Jones Lang Lasalle (JLL) had projected the total investment volume of UK student property in 2017 to be in excess of £5 billion as demand remains high. Image taken from Priestley Lettings UK

UK student property continues to provide rewarding returns to investors over the years. While the final numbers have not yet been released, Jones Lang Lasalle (JLL) had projected the total investment volume of UK student property in 2017 to be in excess of £5 billion as demand remains high.

Recent data reveals that annual returns for student property between 2012 and 2016 reached an impressive 11.8%. Comparatively, in the same period, residential property was at 7.8% and commercial property, as a whole, at 7.4%.

According to data gleaned from the ONS & UK HPI rental growth index, CBRE student accommodation index and IPD quarterly property index, UK student property delivered 10.2% total returns —  a combination of 5.4% rental income and 4.8% capital growth.

Annual returns for student property between 2012 and 2016 reached an impressive 11.8%, a far better performance compared to residential property and commercial property as a whole. Image credit: Property Partner UK.

There was approximately £3.1bn invested in the UK purpose-built student accommodation market in 2016, making it the second highest year on record after the exceptional 2015, when 74,500 beds were traded at a total value of £5.9bn. While the final numbers have not yet been released, JLL had projected the total investment volume of UK student property in 2017 to be in excess of £5 billion as demand remains high.

More students than ever are studying away from home, meaning the demand pool for accommodation continues to grow. In 2016/17 the number of students living in private accommodation increased to 141,210, a growth of 6.4% compared to the previous year. This trend is predicted to continue, fueled by the inability of university-managed accommodation to keep pace with student numbers, and a more discerning and affluent student population.

A chart by Cushman & Wakefiled on the growth of studio bed spaces from 2014- 2017. Image: Cushman & Wakefield UK Student ccommodation Report.

UK universities continue to recruit an increasing number of students from outside the UK, with EU students growing by 48% and international students by 70% over the last decade. There are now over 397,000 students from outside the UK, making up nearly one quarter, or 23% of the student population.

Dan Gandesha, founder of investment platform Property Partner, said that during tough economic cycles where it’s harder to secure a job, people are more likely to go to university and extend their studies. This, he said, increases demand and while the number of places does not spike, it does help underpin the demand for student property.

“Having those counter-cyclical characteristics is quite unusual for an investment class. It’s very different to (other) commercial property. Residential property to some extent isn’t affected in the same way, but it doesn’t have the same attributes of student property, whereby the numbers and the demand go up (in a downturn),” Gandesha added.


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UK student property hotspots

To get the best returns, investors of UK student property should pay attention to cities where universities have plans to grow and relocate campuses, as well as look at cities where the supply and demand balance is favourable. Better value investments can be found in historic and emerging regional locations that have good quality infrastructure and institutions with excellent track-records in education.

For instance, the University of Bristol is planning to invest £300m over the next five years in its brand-new Temple Meads campus, which will be able to accommodate an additional 5,000 students, boosting the demand for student property in the city.

Liverpool’s £2bn vision to establish a 450-acre Knowledge Quarter will further reinforce its status as one of the best student cities in the world. The Knowledge Quarter will encompass Liverpool John Moores University, the University of Liverpool, Liverpool School of Tropical Medicine, Liverpool Science Park, the new Royal Liverpool University Hospital, and will transform the area into one of the world’s leading innovation districts. These new innovations will prove to be a draw to students and working adults alike, fueling opportunities for investors of buy-to-let and purpose built student accommodation.

Birmingham has seen a record rise in the supply of student last year and is now home to 21,000 bed spaces, according to Cushman & Wakefield’s UK Student Accommodation Report. Birmingham is second-largest student city in the country after London, with a student population of around 65,000. The University of Birmingham, Birmingham City University, Aston University, University College London and Newman University are all situated in the city, keeping demand for student accommodation high.

With a current demand ratio of 1 student to 3 beds, UK student property is poised to remain a top investment asset class in the commercial property sector for some time to come. The counter-cyclical nature of this unique asset class, coupled with the UK’s world class education system (and the currently lower pound due to Brexit) will keep the flow of international students coming.


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Cushman & Wakefield UK Student Accommodation Report

By Ian Choong

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and commercial property including student accommodation and carehomes, in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc) and Australia (Melbourne, Perth, Brisbane). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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