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Why smart money invests in student property

April 13, 2017

Student accommodation as an asset class is one of the best types of property to invest in, because it offers industry leading returns and is seen by many as a safe investment. Even during the credit crunch and the years after 2008 the most astute property investors were backing student accommodation.

To understand why it is important to look at the fundamentals of student accommodation. Firstly, supply has always been hard to find for students, there just simply isn’t enough accommodation to house the amount of students in the UK, which is why many students put up with less than favourable housing conditions. Secondly, demand for accommodation is steadily growing; Although tuition fees have gone up demand for student places actually grew as many people looked to up-skill and differentiate themselves, rather than try their luck in an increasingly sparse job market. Furthermore, there was a burgeoning international student population flocking to the quality British universities. This led to many believing that student accommodation demonstrates a counter-cyclical tendency, meaning that it performs relatively well compared to other assets during an economic downturn.

The creation of new wealth in Asia today has fuelled the international student market. More Asian students have been seeking an English-language education, and this doesn’t show many signs of slowing down. The demand from students is really strong and the actual student numbers reflect this with 533,000 first year full time graduates in 2016/17 up from 509,000 students in 2010/11.

The solid fundamentals that drive student accommodation forward have led to the asset class giving higher returns to investors than residential property (as seen in the graph below). On the UOWN platform we currently have three student properties with NET rental yields of more than 6%.

Property Asset Class Returns Comparrison
Source IPD

The drawback to student accommodation is that it tends to be more management intensive, which puts some investors off who are looking for a no hassle, hands off type of investment. The way that we at UOWN have managed to counter this is to partner up with an award winning student property management company - Parklane. They have over 35 years worth of experience when it comes to management of student accommodation so our investors can rest assured that they are in safe hands.

Parklane Properties Office - Interior
Parklane Leeds office, they have won Sunday times Student lettings agency of the year awards for 2015 and 2016.

It’s not just us that have been convinced by how well student accommodation has performed, the rest of the world is taking notice and investing too. In the last 3 years North America has invested £4.3 billion into the UK’s student accommodation market, exceeding the UK’s own investment of £3.6 billion. They are being drawn to the high returns and the track record of student accommodation, and now thanks to the UOWN platform the rest of us can invest in the opportunity too.