Despite the effects of the economic downturn, the student rental market has proven to be one of the most resilient in terms of investment performance and potential. Whilst rents were slightly weaker during 2012/2013 academic year, the forecast for 2013/14 (provided by estate agent Savills) is one of returns of 9.3% with rental growth of 3% and static blended net initial yields at 6.3%.
Although several threats have emerged to the growth in student rental income over the past couple of years the market has remained robust and these positive predictions are widespread – for example, Knight Frank also forecasts solid returns, with rents expected to rise by 3% in London and 2.75% in the regions.
So, what are the issues facing the student rental market and how has the market responded? The increase in tuition fees – which rose to £9,000 in 2012 – had forecasters predicting that the student rental market would take the hit as more students were put off applying for university. As expected, there was a noticeable 6.7% fall in applications for the first year in which fees were increased. However, for 2013 applications are up by 2.7%, indicating that this drop in the numbers of those applying for university was a temporary blip that may have much less impact on the student rental market than expected.
In addition there has been ongoing growth in the numbers of students applying to study in the UK from overseas, particularly from Asia – this is despite the threat that many felt was posed by the introduction of tougher immigration rules. UCAS has released figures showing that applications from students from China looking to study in the UK have increased by 9.9% and those from India by more than 13%. This rise in numbers would seem to indicate that harsher visa restrictions haven’t put genuine overseas students off from applying and may have prevented abuse by non-genuine candidates – as intended – instead.
In addition, whilst student numbers continue to rise, there is an ongoing shortage of student rentable properties in most university and college cities and this scarcity means that renting out student housing has become an even more attractive investment – in fact it is considered one of the best uses of a buy-to-buy property. This type of market means that student rents can be steadily increased year on year and there is little chance of properties remaining empty. There are also opportunities for landlords to charge rent for those periods that have traditionally proven difficult due to a lack of income – such as the summer holidays – as many students are willing to pay to secure a property for the start of the new term. As well as private student housing there is substantial demand for purpose built student blocks, with Knight Frank highlighting London, Edinburgh, Newcastle and Bristol as the most acutely undersupplied student markets in the UK.
The UK continues to be enormously popular as a place to study, both for home grown talent and students from abroad. With this booming demand, as well as a lack of noticeable impact from the rises in tuition fees and tougher immigration controls the student rental market is a very attractive place for any landlord to be right now.
Article Provided By – accommodationforstudents.com