Why student property is a great investment opportunity in 2019
Investing in property has long been perceived as a sure fire way to build wealth. All you need to do is get a buy-to-let property, hold on to it for a few years and house price increases do the rest, right?
Well, as many investors have discovered over the last decade, it’s not quite as simple as that. Rising mortgage costs and a stagnating property market left many amateur landlords out of pocket following the 2007/8 credit crunch. More recently, changes to tax relief have made it difficult to generate attractive returns from single buy-to-let properties.
So is it now impossible for amateur investors to generate income from rental property? Not at all.
In this blog we discuss how savvy investors can increase their wealth through student property portfolios.
Investment opportunities in student property
According to the Higher Education Statistics Agency there are now more than 2.3 million students attending university in the UK. Not only are a higher proportion of UK students moving on to higher education but the UK is increasingly seen as an attractive destination for international students – particularly from developing economies.
And funnily enough they all need somewhere to live. But high quality student accommodation is in short supply.
So it’s perhaps no surprise that student accommodation has become an increasingly popular investment target in recent years as developers rush to meet demand.
Your perception (and indeed memories) of student accommodation may be akin to the squalor and chaos of The Young Ones, but standards and investment opportunities have dramatically increased in recent years. This has been driven by the rise of the Purpose Built Student Accommodation (PBSA) sector, which is predicted to reach a total combined value of £53 billion by the end of 2019.
What are the benefits of investing in student property?
So what are the benefits of investing in student property compared with buy-to-let?
To start with you are investing in a company with a portfolio of student properties, rather than investing in and managing a sole property yourself. So that means no late night calls to fix a dodgy boiler or performing advanced maths to work out how the recent buy-to-let tax changes will affect you.
As physical assets, student property is also typically broken down into rooms as opposed to individual premises. So whether the landlord company owns multiple four-bedroom properties or one large 25-bedroom property the risk is diversified across bedrooms or tenants.
If one student falls behind on their rent but the others keep up to date, this will have minimal impact on the landlord’s ability to pay the mortgage and their overall portfolio.
Likewise, there is less risk of properties lying dormant and not generating income.
Purpose built student accommodation vs developed property
While PBSA has attracted a lot of investment in recent years there are unseen risks that are less applicable to renovated property. To start with PBSA has a sole purpose. If for any reason there is a downturn in student demand, the large buildings cannot be easily converted to generate income by other means.
Property that has been renovated, on the other hand, can easily be rented to young professional sharers. In a worst case scenario these properties can be sold back to the residential market or converted to cater for a wider market, so there is greater liquidity than in a portfolio of PSBA.
Often the renovation process will have greatly increased the value of the property, so any profit contributes to investors’ returns.
Generating income and increasing wealth
While buy-to-let is not as attractive to amateur investors as it was in the past, property is still an effective way of generating income and increasing wealth. With the UK higher education sector continuing to grow student property is proving to be an attractive and stable asset.
By investing in a company that has a strong reputation for building a portfolio of desirable property, with high occupancy levels, investors can achieve returns of up to 10%.
To find out how you could generate strong returns from investing in student property contact stuart@lordpandaproperty.co.uk or joanna@lordpandaproperty.co.uk.
