There has been an increase in the number of purpose-built student accommodation blocks. These tend to be expensive and unaffordable for many students, and because they are expensive to build, small investors often cannot afford to them.
Traditionally, students have lived in houses of multiple occupancy (HMO), but many of these are of a low standard. Andrew Wells, writing on the website Property Week in November 2017, highlighted a gap in the market. He said that there is a shortage of high-quality HMOs with higher rents than low quality HMOs but that are not as high as new luxury student accommodation.
Some investors say that high-quality HMOs can be more profitable than newly built student accommodation.
Many students spend the first year in university-owned halls of residence then want to live with from anywhere from four to seven student friends in large shared house. Many landlords provide inclusive rents and extra facilities such as Wi-Fi and cleaning services. These extra facilities are similar to luxury purpose-built student accommodation, but at lower rents.
The student population is predicted to decrease in the future, but currently there is a high demand for student accommodation. If the student market declines, landlords that own HMO houses can convert them back to family homes. This is something that owners of purpose-built student accommodation are unable to do.
A mortgage broker should be able to find a suitable commercial mortgage to both purchase and convert houses into student accommodation.