A steep rise in student property investment has been recorded across the UK this year, as a weak pound post-Brexit and the superior yields and occupancy offered by student accommodation in university towns and cities capture investors.
According to estimates by Savills, student property investment will reach £5.3 billion by the end of 2017 – a 17% increase on 2016. It is believed that Brexit may well have intensified appetite for UK student housing, as Savills recorded a huge £2.1 billion transacted after the referendum, compared to £1.9 billion earlier in the year.
Demand for student housing assets has outgrown the supply of available stock, however. Of the £4.5 billion traded by Savills last year, £1.1 billion (25%) involved forward funding developments, while £223m (5%) was for development sites. Existing stock made up 69% of trades – the lowest proportion on record.
These growth figures are supported by The Mistoria Group, which specialises in high yielding investment property. The firm has seen demand for student property investment in the North West soar by 38% over the past year. The largest rise in investment came from Turkey, which accounted for 20% of the growth, followed by the UAE (9%) and Hong Kong (5%).
Mish Liyanage, the Managing Director of The Mistoria Group, comments: “We have seen a large increase in international investors’ appetite for student accommodation. They are attracted to the UK because of the relatively low-cost student property on offer, and the excellent net yields that range between 12% and 15% in the North West. Investors have a wide choice of accommodation to choose from, such as HMOs [Houses in Multiple Occupation] to purpose-built accommodation.
“There is a general shortage of student accommodation across the UK, and especially in university cities such as Liverpool and Plymouth. In Liverpool, there are now 21,700 PBSA [purpose-built student accommodation] units, meaning 2.1 students for each unit. With supply of a further 12,400 units either under construction or with planning permission, this ratio just 1.4.”
He believes: “Liverpool is a great university city to invest in. An HMO property with a superior spec can deliver investors an average gross rental yield of 13%, leveraged return on investment of 35% plus, before any charges and voids. A three-bed HMO, which houses three students, can be bought from £120,000 upwards in Liverpool. The return on investment is very attractive too, with 13% (8% cash rental and 5% capital growth). The gross rent on the property will exceed £1,235 per calendar month, as each room is rented out.”
Landlords, have you turned to student property investment?