There are several factors that have fuelled the student property fire that we find ourselves in today. An increased demand from residential developers, coupled with a shortage of land, means that prices are rising sharply.
Developers and investors interest has been piqued by the increased competition for suitable student housing. Despite the UK undergraduate population reaching record highs in 2013, it is estimated that only around 13% of students have access to purpose built accommodation.
Increased profit margins
Investing in student property is a great way to earn extra money, or to introduce some variety into an investor’s housing portfolio.
Despite increased tuition fees the student accommodation market continues to rise, and competition for the nicest and most convenient locations is fierce.
According to the NUS (National Union of Students), the price of student property has risen 100% over the past ten years. From an investment stand point this is a very intriguing figure, as rental increases mean more profit.
Especially since the commercial housing market has been somewhat stagnated and unstable during the recession, it is student property that has remained a positive business investment and one of the only property sectors that has reported continual growth.
Tapping into supply and demand
“The typical student property investment is achieving 8% Net Income per annum,” says Arran Kerkvliet, Investment Director at One Touch Property.
Take Liverpool – one of the North West’s hot stops for university demand – where 70,000 students come to study every year.
The price of inner-city student property has progressively risen; in 2011 a student pod would be on the market for £42,500, now in 2014 that price has risen to £57,000. This results in a steady increase over three years.
When deciding on an area of the housing market to invest, it is noted that student property investment is one of the safest commercial ventures that you can participate in.
Successful long term property investment is achieved by intertwining rental income and capital growth. Student housing accomplishes this, and it can be recognised by the general additional equity that the accommodation provides, as well as the property steadily rising in value.
Is it all good news?
With 19,000 more undergraduates applying to university than last year, the student property market may seem like a sure thing,
The problems that some landlords tend to run into are general maintenance costs, as student properties do require a fair amount of redecoration and upgrading.
Also, any newly built accommodation that is closer to the university will have an effect an investor’s rental income, meaning that typically prices can go down as well as up.
This fluctuation can be realised and managed by employing an experienced property broker, especially one that specialises in student housing.
One Touch Property aim to connect developers and investors with locations that have the most opportunity for growth. Areas like Brighton and Leicester, which are full of students and yet are undeveloped when it comes to suitable student accommodation to house them all.
Growth on investment
There are several steps an investor can take to ensure that their student property investment continues to give then the best return.
Many landlords choose tenants that are students from overseas and postgraduates – mainly because they rent the property for the whole year. Some property-owners do still charge rent for 52 weeks, even when the house is empty and the students have returned home.
It is imperative to remember that the closer that the student investment property is to the university, the higher and more secure any long term rent will be. This is also ideal for the preservation of capital, as it would be difficult to purchase property that is any closer in proximity.
This ensures that even if competing units were to become available, they would be further away from the university – therefore increasing the probability that the student property would be the first one to be rented and therefore increasing the probability of capital growth.
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