Sector remains strongly buoyant

While average buy-to-let rents across the UK may have fallen or remained stable over the past year, one sector that remains strongly buoyant is the student buy-to-let sector, according to the latest data from property investment specialist Assetz.

UCAS reported that student applications for 2009/10 were 2.4 million (up 34 per cent from 1996-1997). However in the face of such demand there remains a huge national shortage of student accommodation. As a result of this lack of supply, rents for student property have increased 19 per cent over the past five years and gross yields for investors are typically between 7-10 per cent depending upon the location and property type.

Benefits of investing in the student property sector are:

Cash-positive, long-term investment. Typical rents are significantly higher for student properties than a comparable buy-to-let property in the same city.
More people are attending universities, creating a solid and sustainable demand. Student numbers are set to continue to rise in coming years, especially in London. Other cities with large student populations include Manchester, Leeds and Sheffield.
Minimal voids. The property is tenanted for almost all of the year and you typically know seven months in advance that your property is tenanted for the next academic year due to pre-lettings.

Rental income has increased by 5 per cent each year for the past six years in the student accommodation property sector. In 2009, many schemes actually achieved 10 per cent gross rental increases.

Student property has continued to be one of the most resilient investment sectors in the UK during the economic downturn, with most rental incomes and property values remaining stable or increasing.

Assetz, comments, “Student property can be a low risk, high yielding and hands-off investment, making it ideal for those who are looking for a safe home for their hard-earned cash.

“The increase in demand for university places and shortage of supply of properties is generating superb opportunities for professional property investors who can purchase apartments in private university halls of residence, or invest in traditional shared student houses. With even more people now opting to go to university, in a bid to both improve their long term job prospects and delay starting their career until the economy recovers, the potential returns for student property investors are set to rise further.

“Despite the potential funding shortfall from the government, demand for student property will continue to be high from overseas students who are able to pay full fees, with a 13.6 per cent rise in international applications last year. These international students are less price-conscious but looking for fully managed private halls of residence so there remains high demand from this sector. Investors have the choice of traditional houses or apartments or can choose the hands-off convenience of specialist student flats in fully managed private halls.

“While traditional buy-to-let landlords have seen stable or declining rents, this is one sector of the property market which is set to continue to benefit from the economic downturn.”