When it comes to investing in property, student accommodation has not always been the first thought for many investors. However, trends are now showing that demand for this kind of property is rising in a way that the property market seems unable to keep up with, and there are some good reasons for this.
Student accommodation is proving to be a very profitable investment for a number of people, whether it is their first foray into property investment or whether it is boosting an existing property portfolio.
As with any type of property, there are some areas of the country that will get you better returns, and the combination of low average property prices, high demand and good rental yields, Manchester is proving to be a hot spot when it comes to the student accommodation market.
Types of student property
There are two main types of property that landlords look to invest in when it comes to student property. The first is buying a traditional property and renting it out to students privately. Usually, this will mean dividing it up into a number of different living spaces, but does mean that you are able to house and collect rent from as many as five or six students at a time.
This can be a profitable option, but it does come with some headaches. If you are not in the local area, then you will need a letting agent to manage the property for you, and cleaning up when a group of students have left the property is not always an easy task.
If you are buying a typical house in a city, then there are no guarantees that you will be able to find one close enough to the university in question, and this can limit your available market, potentially leaving the property unoccupied at points. However, it does put you in full control of the rent that you charge and how the property is run and looked after.
Another option is to invest in purpose-built student accommodation. This are often large blocks which have been broken down into high quality apartments for individual students.
As they have been built for students, they often come with their own management services, meaning that there is someone looking after the property at all times, and they are usually close to one or more universities.
These tend to be very appealing to students due to their favourable locations and the fact that they often come with other facilities such as gyms, games rooms and courtyards. Rent in these forms of accommodation can be as much as 75% higher than in more traditional multiple occupancy properties, making them an extremely profitable proposition.
Student property demand
Mark Burns, Director of Pure Investor commented, “The demand for student property has never been higher, with more students than ever before moving into higher education. During 2021/22 there were 2.86 million students attending university in the UK, and there is a steady flow of at least half a million students entering university education each year.”
It is believed that more than 100,000 students are enrolled in the five Manchester universities, with 19,000 of those coming from overseas, which shows exactly why the market in this city alone is struggling to keep up with demand.
This number of students is growing year on year, and it shows no signs of slowing down, but it does pose the question of where they are all going to live. It is thought that there are as many as 3.5 students for every bed when it comes to purpose-built student accommodation, which means property investors will not find their investment standing empty. With thousands of students flooding into cities like Manchester each September, many are finding that there is just not enough housing to go around. With demand outstripping supply to such a massive extent, it becomes easy to see why investors are now paying this market so much attention.
Property prices in Manchester remain modest, but with demand at an all time high, rental yields are proving to be bountiful. Manchester has five universities to choose from and is well known for its combination of nightlife, sport, and cultural links, as well as having good opportunities for students after they graduate, with more and more big firms setting up home in the city.
This helps to make the city a massive draw, and property investors are reaping the benefits. Student properties are well known for having the greatest rental yields of any housing lets as you can charge by the room in bigger properties. The trend for demand outstripping supply seems to be much higher in norther student cities such as Manchester, Bradford and Nottingham, showing that these can be good long-term options for investors.
Investing in student property
The current market presents a great opportunity for investing in student property. The outlay for the initial property can be relatively low, especially when buying individual apartments in purpose-built accommodation. This makes it an easy market to get into, particularly if this is your first time investing in property.
The rental yields for student accommodation are very healthy, meaning that your monthly costs are likely to be fully taken care of with some to spare as well. Thanks to the fact that demand for university places shows no signs of slowing, and the construction of new property in already heavily built-up cities is unlikely, the price of student property will be high when the time comes to sell, meaning there should be a worthwhile capital gain to be had as well.
Student property can prove to be an excellent way to diversify an investment portfolio, as it deals with a new market in a relatively low risk way. You are unlikely to be left with a vacant property, and there will be little work that needs to go into finding new tenants. This is even easier in the case of purpose-built student accommodation, as many of them will have waiting lists of students who are eager to take up a spot of their own.
