Investors in student property prepare for mini boom

This surge in demand is generating superb opportunities for professional property investors who purchase apartments in private university halls of residence, or invest in traditional shared student houses.

Investors could enjoy high net yields in the region of 5-6% (8-10%+ gross), Assetz said, as a result of strong demand and firming rents.

With even more people now opting to go to university, in a bid to both improve their long-term job prospects and delay starting their career until the economy recovers, the potential returns for student property investors are set to rise further.

Stuart Law, Chief Executive of Assetz, said: "Investment in university accommodation is already paying massive dividends. It is an area in which I have invested personally over the years and it is the best performing part of my portfolio for income. Student property funds have also topped the leader board of property fund performance over the past couple of years, and the latest surge in applications will continue to drive demand and further enhance the investment potential.

"Student property offers investors a high-income investment, partly due to huge tenant demand and partly now as a result of the relatively low mortgage rates available. With traditional buy to let landlords currently seeing stable, rather than growing, rents and rising unemployment underway, this is one sector of the property market which is set to benefit from the economic downturn and is a great diversifier."

Property case studies

Example of investor purchase: Manchester

House of Multiple Occupancy (HMO): £385,000

65% mortgage at 6% costing £15,015pa. A deposit of £134,750 is required.

Anticipated rents from students or young professionals at £2783 per month.

Income after management charge and mortgage costs is £15,041.

Example of student/parent purchase: Manchester

2-bedroom apartment: £99,950 (reduced from £135,000)

100% mortgage at 5.25% costing £5247pa, provided the parents guarantee 25% of the mortgage. The student saves around £4500 rent pa elsewhere and rents out a room for to another student, bringing in an income of £4,500. After service charges of £800 pa, the student is £2953 a year better off.

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