Student accommodation has come on a long way from the run-down digs of yesteryear, and the student of 2016 now often lives in a plush “pod” often in a building fully kitted out with state of the art facilities such as gyms.
On the face of it, investing in student accommodation is a very sound investment thanks to its fairly low investment, guaranteed income, and relatively low involvement on your part.
For their investment (which can be as low as £40,000-£50,000), investors are offered a property with a “rental guarantee” and don’t have to worry about the hassle of looking after the property or looking for new tenants.
In addition, student housing has been named as the best-performing property asset in both the UK and the USA.
This article from the Financial Times from 2012 estimated the market at being worth $200bn (£143bn), with the number of rising from 98m to 165m in just over ten years.
It all sounds pretty promising, with a guaranteed return on your investment and minimum input from yourself, so what’s the catch?
While there isn’t a ‘catch’ as such, there are a couple of hidden risks that you might want to consider before pouring all your money into student accommodation!
Firstly, you’ll probably have to pay for your investment out of your own money, as mortgage lenders will usually be quite reluctant to fund this kind of venture.
Secondly, you’ll find that most of these developments are sold before they are finished. This leads to the risk that things may hit a stumbling block during the building process and could lead to the project either being delayed or abandoned altogether.
Finally, you have to think about how the investment is eventually going to end. For example, with a traditional property you can just sell it on to a first-time buyer or someone who is moving home, but with a student property you’re essentially limited to selling the property on to another investor.
However, if you’re comfortable taking on these risks, there is still plenty to be gained from investing in student accommodation.
A poll carried out last year found that student priorities are starting to shift from nightlife and entertainment toward their education and studying.
With university fees recently rising to around £9,000 a year, students are placing much more emphasis on getting their degrees, especially as it becomes tougher and tougher to get a degree.
How does this benefit investors you might ask? This means that students are spending much more time in their accommodation, and are more prepared to spend that little bit extra on a luxury touches, which is where the opportunity lies.
We spoke to Bellvue Students who provide student accommodation across the country, and they told us: “We’ve found that over the last five or so years, students have come to expect some degree of luxury from their accommodation. ”
“We’ve also noticed that there is a fair imbalance between supply and demand when it comes to student housing.”
“While we expected student numbers to drop when the fees went up a couple of years ago, the opposite has actually happened as students try to get the skills needed to succeed in the current economic climate.”
“Lots more students are also arriving from overseas, especially Asia, and they often have a preference for purpose built accommodation.”
Investing in any property is a big decision, and the pros and cons always need to be weighed up.
Don’t be sucked in by the claims that student accommodation is a risk free venture, because it isn’t, but neither is any other investment!
And just like other investments, student property could prove to be a canny long term investment, especially as demand increases.
For any further advice when it comes to property and mortgages, feel free to get in touch with one of our mortgage advisors free of charge at Search Mortgage Solutions.
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