Student accommodation is an increasingly popular form of property investment attracting British and foreign investors. In one of the biggest investments this year, the property section of Temasek, a Singapore state investment fund, bought 25 student residences for £417m, said MoneyWeek.com in November 2016.
There are over two million people studying in Britain, which is more than half a million more than 20 years ago. According to estate agents Knight Frank, there are over half a million purpose-built student accommodation bedrooms, with a further 90,000 granted planning consent and another 40,000 applications for planning consent.
Sarah Moore, writing for MoneyWeek, says that there are several ways that people can invest in the student accommodation market. Investors can purchase a unit within a development. This typically costs around £60,000, with a management company dealing with finding tenants and organising maintenance.
It is, however, very difficult to get a mortgage for this type of property investment. Many of these investment haves a fixed-term guaranteed return that seems attractive, but Moore warns that after this period, yields could decrease and management fees rise. Some management firms have ceased trading leaving investors to deal personally with the students.
As a result of the risks, Moore does not recommend investing in single units. She says that investors should consider purchasing a buy-to-let property for students. Commercial mortgages can finance the property purchase and the investment can create good returns. Student accommodation is not always straightforward though, as landlords will need to deal with the complexities of a multi-occupancy property.