A new study by Savills, one of the most respected property consultants in the industry, claims that student lettings are currently outperforming most other property investments in the UK. The statistics Savills have produced closely examine student applications and the expected volume requirement for accommodation in university cities - and the results disclose that demand is rising, creating excellent opportunities for buy to let investors that are prepared to supply this target market.
Although this study is primarily aimed at corporate investors, it offers some very useful insights and direction for both the experienced and new buy to let investor and particularly those now considering which sector of the rented market they should expand into or become involved in for the first time.
The report states that first year applications from students rose by a massive 105% at Edge Hill University, Ormskirk, and by about 100% at Lancaster University. These figures suggest that both Edinburgh and Lancaster top the chart in student popularity - and they are therefore cities worthy of buy to let expansion to supply the anticipated increase in demand for student accommodation. Other locations where applications have risen by more than 60% are also highlighted in the report. These include Stirling, Huddersfield and Dundee.
In these challenging economic times, many universities are looking to restrict capital spending and are not therefore tending to expand their own blocks of student accommodation. The consequence is expected to be an inevitable shortage of suitable housing for students, particularly in the most popular locations. While corporate investors may be invited to meet this demand through stock transfers and new build projects, there is always room for the smaller investor to maximise on the opportunities presented to them in this market.
It is interesting to note that Savills report also predicts that UK universities are set to have even more foreign students over the next decade, creating even more local demand in the private rented sector. While demand from the US, India, China and Europe is expected to stay about the same, the report suggests more will come as a direct result of the boom in emerging economies in the Far East, South America and Africa. Even the official statistics seem to back-up this prediction - higher education agencies say there is likely to be about a 30,000 increase in foreign students, with many probably wanting to live and study in and around London.
The student let market has always been popular amongst landlords, not least because the average annual yield is around two or three percent higher than with other lettings. While there are management issues specific to this sector, the rewards can be considerable for those that take the opportunity to specialise by offering good quality and competitively priced accommodation to students. However, good timing is essential, because most students take a property prior to the start of term - and keep it for the duration of the term - landlords that miss this window of opportunity can find themselves with a property (designed specifically with students in mind) that stands empty for months.
Over half a million students will be starting their UK university courses in September, which means the window of opportunity is available to would-be investors now as students look to secure suitable accommodation in the private rented sector. The student let market is buoyant - and it seems it is set to provide buy to let investors with lots of potential for many years to come.
To read the full report by Savills, click here.