Investment in student property has risen in 2017 due to the strong yields offered in university towns and cities coupled with a weak pound.
New research from Savills’ has revealed that investment in student property will reach £5.3 billion by the end of 2017. This marks a 17 per cent increase in comparison to 2016. The research suggested that Brexit may have added to the appetite for UK student housing after £2.1 billion was transacted in the sector after the referendum in comparison to £1.9 billion earlier in the year.
The growing demand for investing in student housing assets has outgrown the supply of available stock. 25 per cent of the £4.5 billion traded by Savils last year involved forward funding developments, whilst existing stock made up just 69 per cent of trades. This marks the lowest proportion on record.
The Mistoria Group, specialists in high yielding investment property, supported the high growth results, having seen demand for student property in the North West rise 38 per cent year on year. This was fueled by an increase in investment from Turkey, which accounted for 20 per cent of the growth. The UAE accounted for 9 per cent and Hong Kong at 5 per cent.
Managing Director of The Mistoria Group, Mish Liyanage, commented: ‘We have seen a large increase in international investors’ appetite for student accommodation. They are attracted to the UK because of the relatively low-cost student property on offer and the excellent net yields that range between 12 per cent and 15 per cent in the North West. Investors have a wide choice of accommodation to chose from, such as HMOs to purpose-built accommodation. There is a general shortage of student accommodation across the UK and especially in university cities such as Liverpool and Plymouth. In Liverpool, there are now 21,700 PBSA units, meaning 2.1 students for each unit. With supply of a further 12,400 units either under construction or with planning permission, this ratio just 1.4.’
He concluded: ‘Liverpool is a great university city to invest in. An HMO property with a superior spec can deliver investors an average gross rental yield of 13 per cent, leveraged return on investment of 35 per cent plus, before any charges and voids. A three bed HMO which houses three students, can be bought from £120,000 upwards in Liverpool. The return on investment is very attractive too, with 13 per cent (8 per cent cash rental and 5 per cent capital growth). The gross rent on the property will exceed £1,235 pcm, as each room is rented out.’