Buy to Let investors have been attracted to this asset class as it can be very successful due to the demand for student accommodation near to Universities all over the country.
Investors are attracted to the relatively higher yields on offer and over the last ten years or so the sector has boomed. This growth is because of the sharp increase in students and property is still undersupplied in the cities where the main universities are. The hotspots are reportedly places like Bath, Bristol, Cambridge, Edinburgh, London, Oxford, Brighton and Cardiff.
Whilst tuition fees have increased, in a global context the cost of higher education in the UK remains cheaper than the closest rival. For many leading British universities and the purpose-built student accommodation sector, this portion of the market remains key, and for now, the hotspots are where the highest demand is.
“Location is by far the most important factor when buying a student property,” says Simon Thompson, managing director of accommodationforstudents.com. “Student preferences have changed in the last few years: while they used to live in student areas away from campus, they now want to be as close to campus as possible.”
New-build or purpose-built student accommodation is often where investors concentrate owing to the recent legislation, which is restricting the amount of older properties being used as Houses of Multiple Occupancy (HMO). The government regards these types of property as a source of loss in terms of potential council tax revenue and inefficient land use, and consequently councils are making it more difficult or more expensive for investors to achieve the yields they seek.
Demand from students, especially those from overseas remains strong. China, Hong Kong and India account for around 25% of all international students attending universities in the UK alone. High demand for purpose built student accommodation is maintaining high and increasing rental growth.
Be careful though because some lenders will not lend on properties that are to become student lets. There are some lenders that will but they may restrict the number of tenants (to five or eight typically) or require a larger deposit of thirty-five percent or more.
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