Investing in student accommodation in the UK has become increasingly popular in recent years. With strong demand from a growing international student population and limited supply, student housing offers stable occupancy rates and attractive returns compared to traditional buy-to-let properties. This article will examine the market dynamics, investment value, and risks of the UK student accommodation sector, centered around the key words ‘student accommodation investment uk’.
The UK attracts a rising number of international students, fueling demand for purpose-built accommodations
The UK is a leading study destination, hosting over 570,000 international students in 2020/21. However, purpose-built student housing supply has not kept pace, with only around 668,000 beds nationwide. Student accommodations are usually fully occupied during term time and benefit from a captive customer base. Major student housing providers like Unite Students and IQ Student Accommodation have continued their expansion plans despite Brexit uncertainties.
Student accommodations provide higher yields than traditional private rentals
According to CBRE data, UK student housing yields averaged 4.5-5.5% in 2021, significantly higher than yields of 2-3% for mainstream residential. Student housing enjoys higher rents due to strong demand and extensive amenities like gyms and common rooms. The captive tenant base also results in higher occupancy rates and rental stability compared to regular private rented sector (PRS) properties.
Investment volumes rebounded strongly post-pandemic
After COVID-19 disrupted investment activity in 2020, transaction volumes in the student accommodation sector surged 86% to £4.8 billion in 2021. Investors were attracted by the sector’s resilience and growth outlook. However, rising interest rates could impact yields and development viability going forward.
Smaller cities offer higher returns but also more risk
Prime London assets traded at sub-4% yields in 2021, prompting investors to target higher returns in regional cities. However, smaller university towns face greater supply risk, as purpose-built accommodations could be overbuilt. Investors should focus on cities with top universities and growing student numbers.
In summary, strong demand dynamics and resilient operational performance make student accommodations an attractive investment if risks around development and location selection are appropriately managed.