Over the last decade, the UK’s student property sector has been on the rise showing no signs of slowing down. As a result, Purpose Built Student Accommodation should be considered an evergreen asset class with very little volatility and excellent upside potential.
In this feature, Fabrik Invest looks at why the market is performing so well, the reasons behind this trend, and what we can expect in the future.
What is Purpose Built Student Accommodation?
Designed with students in mind, Purpose Built Student Accommodation (PBSA) generally contains a mix of en-suite and studio apartments and offers a selection of onsite facilities to help tenants build a sense of community within the building. PBSA projects generally feature an onsite gym, laundry room, communal and study spaces, plus a management team onsite.
For students, PBSA is generally cheaper than private rental property and often includes all bills, which makes renting this type of accommodation more affordable and more accessible for them to navigate. For international students, PBSA is their first choice of accommodation as it requires less hassle to set up than renting privately and organising bills and subscriptions.
If you are looking to invest in property, then Purpose Built Student Accommodation offers a great investment opportunity. High-quality developments in prime UK university towns and cities with demand for PBSA deliver higher than average rental yields compared to residential or commercial assets. With more than 5 million students in higher education and more coming every year, there has never been a better time to invest in student accommodation.
High demand from international students
The UK is a top choice for international students because of its prestigious universities and is only second after the USA as a leading destination for overseas students. The British Council says the UK attracts more than one million international students annually.
Despite concerns over Covid-19, applications from other overseas students increased to record levels in 2020 and 2021, highlighting the continued popularity of studying in the UK.
The high volume of international students creates an annual influx of new people who need to secure adequate and affordable housing.
However, it is not just international students who need somewhere to live at university. According to data from the student lettings platform UniHomes, there was a 79% rise in student accommodation enquiries compared to the previous year.
In Manchester alone, the demand for student rooms was so high in 2022 that Manchester University could not accommodate just over 350 students.
View our latest Student Accommodation Investment in Manchester.
For investors, evergreen assets like Purpose Built Student Accommodation provide investors with a reliable and predictable return on their investment.
How to invest in student accommodation
The best way to invest in student accommodation is to seek advice from an independent consultancy like Fabrik Invest to enquire about off-plan developments in major UK university towns and cities.
The fully managed nature of student property makes it an excellent option for portfolio diversification. Each unit is sold on a long leasehold and delivers a passive rental income which is often assured by the developer for a pre-determined period of time.
Why student accommodation is a good investment
For those considering entering this market in 2022 and beyond, one of the main considerations will be the reliability of demand from tenants since this provides the fuel for further growth in yields and minimises the risk of void periods.
Investors should be encouraged by research published by real estate services firm JLL, which predicts an additional 500,000 full-time students will be in the UK by 2030.
What’s more, according to government data, there was a record level of 750,000 applications for full-time undergraduate places through UCAS in 2021, with roughly 560,000 applicants accepted.
Investing in a Purpose Built Student Accommodation is a great way to diversify your portfolio with a low entry-level property that will deliver an assured return. Student accommodation has a high demand and new students every year, which means it will not be an obsolete asset anytime soon. Plus, the fully managed nature of the asset class makes it ideal for novice investors or buyers based overseas.
For more information about our latest Purpose Built Student Accommodation and to determine whether this asset class is right for you, contact Fabrik Invest.
