Investing in student buy-to-let property

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You may have recently seen a number of news stories in the broadsheets, local papers, and features on television news, highlighting the shortage of student accommodation in some major UK university towns, so we thought we would examine some of the factors influencing this property sector and explain why now is a good time for investing in student buy-to-let property.

In our last article, ’Which buy-to-let is right for you?’, we took a closer look at three different types of property investment: Residential, holiday, and student accommodation.

In that guide, we outlined the pros and cons of investing in different buy-to-let property opportunities, so you can make an informed decision about which type of property investment best suits your needs and personal circumstances.

Here we are going to concentrate on investing in student buy-to-let property.

Investing in student buy-to-let property – why now?

Further to an article published in The Guardian last year, which reported that student housing had reached a ‘crisis point’ not seen since the 1970s, Martin Blakey, the Chief Executive of the student housing charity Unipol, has written a blog on the same subject for the Higher Education Policy Institute (HEPI).

2022 saw a shortage of student accommodation in Bristol, Brighton, Durham, Glasgow, Manchester, and York.

In his blog, Martin Blakey expands on the some of the trends that have created a perfect storm in the student buy-to-let property market and explains why there is a shortage of student accommodation in cities across the UK, with Bath, Cambridge, Cardiff, Edinburgh, Lincoln, and Salford also expected to see a shortfall.

In addition, Aston, Anglia Ruskin, Birmingham, Bournemouth, Canterbury, Huddersfield, Leeds, Liverpool, Newcastle, and Portsmouth also may be facing their first year of a shortage of student accommodation.

Demographics

We can expect more than one million more 18 year olds in the UK population between 2020-30, which could result in a rise of 40,000 more university applications by 2025, according to current trends in admission.

However, Martin Blakey does add a caveat to this statistic, in that the growth of UK students applying for university places has remained fairly static in recent years.

 

Growing number of international students

The demand for accommodation from international students grew by more than 276,000 between 2019 and 2022 across both undergraduate and postgraduate courses.

This has led to an unprecedented demand for student accommodation, especially in major cities.

Postgraduate students from overseas are more likely to be housed in purpose build student accommodation (PBSAs) than UK students, who account for around 25% of this student housing sector.

 

Deferred Places

Some international students are returning to study after leaving the UK during the pandemic along with UK students who may have deferred the start of their course.  

 

Slowdown in the development sector

The development of PBSAs has declined considerably since 2020, from around 30,000 beds per year (which had remained fairly constant since 2010), to a projected figure of less than half that number by 2023.

However, less than 10,000 of these units are completely new.

The rest consists of units coming back on to the market following remedial works or refurbishment.

High interest rates and the rocketing prices of building materials have also contributed to fewer PBSA newbuilds.

Unipol has stated that they expect PBSA beds to remain at the same level next year, but that 2025-26 may see no growth at all in the number of new units coming on to the market.

 

Private landlord student accommodation provision

A number of universities have reported a decline in the amount of available student accommodation supplied by private landlords as HMO housing, which mainly comprises houses converted for the purpose of student sharing.

There are many factors for this decrease of availability, including,

  • Properties leaving the market for personal/family use

  • Properties in tourist areas being used for holiday rentals, especially where there is an established demand through Airbnb properties, for example

  • Landlords of properties in urban areas, especially those with strong job markets, are choosing to rent to young professionals instead

In an article published on 10th July, the Evening Standard reported on the landlord Unite, (which lets out 70,000 beds to students across 157 properties).

The company has upped its rental growth value guidance to 7% this year after stating that 98% of its properties had already been rented more than two months before the new academic year was due to start.

Moreover, Unite’s CEO, Richard Smith, said “The supply of purpose-built student accommodation cannot keep pace with growing student demand, at the same time as HMO landlords are leaving the sector.”

 

Universities

Although university admissions have risen by 65% since 2000, student accommodation has not kept pace with this rapid expansion – a situation made worse by universities administering less of their own housing facilities by choosing to partner with private landlords.

What does this mean for PBSA property investments?

An increase in demand for limited student accommodation provides market certainty and an increase in yield for those choosing to invest into PBSAs at this time, a fact corroborated by Richard Smith’s statement above.

 

Plus, a greater proportion of students are now willing to look further afield for housing, preferring to commute from where there are beds, rather than risk not securing accommodation for the start of their course.

 

So, now is the perfect time to talk to the Holmeshaw team about our Vision@Huddersfield development opportunity from premium student property brand Abode.

 

We have already mentioned at the beginning of this article that Huddersfield University has been highlighted for a possible shortage of student accommodation this year.

 

The opening of the Health & Innovation Campus at the University, plus a regeneration vison for the town comprising 11 major schemes and an investment of around £1 billion, makes it the ideal location for student property investment.

 

Due to open in 2025 and comprising 198 studio apartments and dedicated study areas, the development also features hotel-style amenities such as a fitness centre, coffee shop, cinema room, and even a roof garden.

 

Located within the University of Huddersfield campus, this renovation of an existing building is only a three minute walk away from Huddersfield town centre and its transport links to Leeds, Sheffield, and Manchester – the latter is already suffering from a shortage of student accommodation. Investors in this new development brought to you by Holmeshaw will benefit from:

 

  • A hands-off, hassle-free investment with management fees and a service charge of £1750 p.a.

  • Apartments fully managed by Homes for Students, a market-leading student accommodation provider

  • 8% NET rental return assured for the first three years

  • Apartments furnished throughout in a choice of three styles

  • 125 year leasehold

  • No ground rent

  • Investments start at £86,995

The old saying ‘location, location, location’ rings true for property investments and this student accommodation development is situated in a prime location with transport links to other major cities.

 

It has a strong rental market for this type of housing and good prospects for growth shown by the commitment to developing both the university and the town.

 

We would love to discuss investing in student buy-to-let property with you or you can discover more about our Vision@Huddersfield project on the Holmeshaw website. At Holmeshaw, we promise to never recommend an investment opportunity that we would not be prepared to invest in ourselves, so contact us today for more information on this remarkable investment opportunity.