The city that a student chooses to study in can shape the rest of their life, and as an investor in student property choosing where to park your money, many of the factors a student needs to consider are the same as yours. This decision can also shape the rest of your life, whether you get it right or wrong.
For a city to be worth investing in, there needs to be a good and reliable supply of potential tenants. That means the city needs to be attractive to students and therefore needs to have all the things a student is looking for. Of course, if you are looking at investing in a particular city you need to study a lot of very different things, but fundamentally, you are looking at a supply and demand issue and that largely comes down to how attractive a city is.
In May 1992 there were just under one million students in higher education in the UK. At the start of the 2020/21 academic year this had gone up to 2.66 million, which itself had gone up 5.4% on the previous year and was a record high for the UK’s student population. The rapid rise in student enrolments at the UK’s major universities in the late 1990s was met by a commensurate rise in the construction of purpose-built student accommodation (PBSA), this being apartment blocks and flat developments providing a new and improved standard of student living compared to the traditional perception.
Traditionally, students have lived in shared accommodation provided by the private rental sector or in university halls; PBSAs built, owned and managed by individual universities. The student population boom has, however, seen many property developers react with the provision of high-rise developments, often in city centres or on good transport routes between university campuses and nightlife epicentres. Where a steady supply of students can be guaranteed, this has led to a lucrative return for some property investors.
The appeal of student property investment is having multiple income streams from one property, be that a PBSA or house of multiple occupation (HMO), and a reliable and continual source of tenants. In addition, student properties do not require high standards of furnishing, albeit these are much higher now than the traditional image of student living from many years ago. There are some drawbacks to student investment – void periods out of term time, references and guarantors, additional management required etc – but if an investor chooses a city and location that has a strong and established student population, and a property that suits the student market, then it is easy to understand why student property investment is so popular, even taking into account the Government’s crackdown on the private rental landlord market in recent years.
So first and foremost, if you are looking to invest in a student city in the north of the UK, you need to understand what students are looking for and what makes a particular city popular. After this you need to look at more specific property-related issues such as the economy, planning and development proposals in a location, and your own financial circumstances. But in the first instance, what factors make a student city a good place to live?
Affordability – Everyone is struggling with the cost of living at the moment, and students face a constant struggle to get this balance right, but some cities do differ in terms of average rental charges, and some areas within a city can show a variation in what a landlord can or does charge. If a location has a better standard of accommodation, for example a city centre complex, then this will also be reflected in the cost of bars, restaurants and shopping nearby.
Welcome – Does a city or location have a friendly welcome? Are the people appreciative of students or is there hostility in some areas? Would students feel safe in the city? If there is a large student population this tends to mean that students are an established and accepted part of the city and its culture.
Employment – A clued-up student will be looking at a city as a potential long term base and a good percentage of students stay in their chosen city after graduating to embark on a professional career. So are there strong financial, digital, leisure, cultural or legal sectors? How is the city changing, are there lots of exciting developments? Fundamentally, is the city progressive and prosperous?
Culture – This will be at the top of the list for many young people and essentially boils down to night life and things to do. All the big northern cities – Newcastle, Manchester, Liverpool, Leeds, Sheffield, Glasgow and Edinburgh - have a rich variety of arts and culture as well as sports, tourism, retail and a strong heritage. So it is easy to see why they all hold an intoxicating appeal to potential students.
University rankings – It is true that most students will be looking at the appeal of the city itself before the university, but it is possible to study a university’s credentials for the quality of its courses, pass-rate percentages and the ratio of undergraduates to post-graduates etc. Where a student has a very definite career path in mind, of course, some universities will carry more appeal than others, and hence the city and some of these other factors here will become less important.
Location – Everyone is different, and while some students will want to move as far away from their family as possible, others will have stronger ties to home and won’t want to move too far away. This is usually the student’s first move out of the family home, so often there will be commitments to family, friends, partners or maybe even a part-time job, which means that proximity is important.
Interests – In a quiet moment, many students would confess to wanting to study in a certain city because of a hobby or interest attached to it, rather than any particular course or university ranking. This could be a football team that they support, a band or scene which originates from there, or just the fact that friends or a partner are also studying in a particular city.
The promotion of the Northern Powerhouse cities as progressive places to live outside of London in the new Millennium, is also reflected in their popularity as student locations. In truth, the big northern cities have long held an established reputation for attracting strong and diverse student populations, and that doesn’t look likely to change any time soon. An obvious reason for this is that they all have a range of very strong and successful higher university establishments.
Newcastle – was voted as the top student city in the UK in 2018, based on a survey run by Student Hut which looked at transport, shopping, nights out, eating out, value-for-money and entertainment. Newcastle scored highly for nightlife.
Liverpool - is another thriving city which has a very strong cultural heritage, while people also marked it high for being a smaller, more compact city and with a lower cost of living.
Sheffield – has a bustling independent scene and a friendly, community feel and is also a city that combines all the large-scale trappings you might expect but is also surrounded by glorious green spaces.
Manchester – has the highest student population in the north and it is easy to see why, with some of the best cultural, sporting and retail attractions in the UK.
Leeds – scores highly all-round for cultural attractions, tourism and retail, plus a central proximity to transport links, countryside and other big cities, but Leeds is also a very progressive city offering good employment opportunities.
Glasgow – offers a friendly and welcoming vibe with perhaps a more affordable cost of living, but concedes nothing to high standards of nightlife and culture.
Edinburgh – also flies the flag for Scotland and offers a cultural heritage that is dripping in character.
The table below shows the respective student populations of the major student cities in the north, according to a study by the HESA. In all cases we are looking at the enrolment figures for the two largest universities in each city, as these are the most established institutions and reflect most closely the strong demand for student accommodation in these locations. The figures for Manchester are slightly misleading, because the nearby University of Salford, in Greater Manchester, also has a student population of over 30,000.
When assessing the issue of supply and demand and whether a student property investor should consider making a commitment to a specific city, you would need to assess the current stock of student accommodation available. In most of these major cities there are currently a number of ongoing developments aimed at satisfying some of the demand for affordable student accommodation.
As mentioned earlier, there is now a shift from traditional student accommodation in the private rental sector – mainly older, terraced houses which can be divided up into HMOs in order to maximise income for the landlord – to a more even balance of these with PBSAs. Not surprisingly, students now prefer to live in PBSAs because they are new, have better facilities, have a 100% student population and hence are safer, and are often centrally located close to amenities, transport and attractions.
If we take Leeds as a typical example, a report by the Construction & Housing Yorkshire division of Re’new from 2013/14 shows that there was actually a surplus of accommodation, estimated at this time to be around 4700 bed spaces. So this would have been a bad time to invest in student property. This surplus of accommodation was because the late 1990s student population boom had slowed down. In 2013/14 the total student population in Leeds was 49,530, compared to 60,530 in 2020/21. The city had no need for new PBSAs in 2013/14, and indeed the report predicted that the student population would reduce in the next few years, when it has actually increased by over 10,000 people. But the city has been slow to react and there is now an urgent need for PBSAs, while the existing HMO stock is enjoying high demand levels. It is fair to say that the same could be true in all the major northern cities in the UK, and this example demonstrates how an investor needs to be patient and wait for the right time to invest.
So what factors do you need to look at when considering a student city in the north to invest in?
The split between PBSA stock and older, more traditional HMOs: Modern students want PBSAs, but if there is an under-supply of those in a certain city, HMOs will still be popular.
Population trends: Study the historical student population figures and see what the trends tell you. If the trend is downward, the list of factors we looked at in the section ‘What makes a student city a good place to live?’ might be suggesting this is no longer a good city to study in or invest in.
Tuition fees: With every year that passes, student debt levels become even more eye-watering and eventually the bubble might burst and be reflected in a serious downturn in student populations. You could try to navigate this by off-setting this cost with a more reasonable rental charge, but ultimately you need to be making money. So keep an eye on trends and the news. The student population in a given city might start to tail off, but not to such an extent that rental demand is badly affected. So always ask yourself: Is student property still a good long term investment?
Planning policies: Different local authorities have different attitudes to housing, developments and student populations. In Leeds at the moment there is a rush to build more PBSAs, so a property investor can try and cash-in on that. In another city the planning policy might not be so progressive and you might struggle to move forward with your plans to develop a PBSA or adapt a property into an HMO.
New developments: Are there plenty of things happening in a city that will maintain it as progressive, exciting and offering employment opportunities? Is the city still up and coming? Taking Leeds as an example again, it is a city with a new Premier League football team, it has attracted the new Channel 4 headquarters and there is huge investment from high profile banking, legal and media institutions. This all suggests Leeds will be a prosperous city and ripe for further investment for the foreseeable future and hence is a good city to buy property in. Can you find the same investment prospects elsewhere?
Any property investment is guided by your own personal circumstances and the current state of the property market, but with student property investment, there are a number of other factors to consider. Fortunately, the big northern UK cities are all well-established as major university locations, so there is certainly a good selection to choose from when deciding where to invest.