The demand for suitable housing for students attending UK universities has continued to rise in recent years despite the predicted detrimental effects of Brexit on UK investment. Nearly approaching the final steps of Brexit, the implications of the leave vote are not exactly as predicted. The weaker pound has attracted many investors to the UK property market, especially foreign investors who want to take full advantage of the cheaper prices.
Student Housing Investment Is Soaring
In the UK, the student accommodation sector has been the top performing asset class for 5 years straight. Alternative property investments such as Purpose-Built Student Accommodation (PBSA) have become more appealing to investors in the Private Rented Sector (PRS) as buy-to-let becomes more restricted with regulations.
The PBSA investment sector also has higher yields than buy-to-let, which is one of the many reasons why investors are reducing their expensive to maintain residential portfolios and moving towards a fully-managed student accommodation investment.
The market is also changing as modern students look for higher quality housing than the traditional small, dull box room in a shared house. Today’s students expect high specification accommodation to make their experience memorable and enjoyable whilst living away from home. The luxury-style student accommodation also appeals greatly to foreign students who are more willing to pay a higher rent for an all-inclusive hotel-like way of student living.
Investors see the opportunity in this sector and that is supported by the success of these investments in previous years. In the first 3 months of 2018, the student property sector experienced £1 billion in transactions, showing just how lucrative the sector is and how willing investors are to act upon it.
Foreign Investors Seize The Opportunity To Invest In UK PBSA
A combination of the past success of PBSA investments for domestic investors and the weaker UK currency due to Brexit has enticed investors from all across the world. Individual and multi-million companies alike have expressed their interest in this UK sector, which we can see in reports. There has been a big increase in foreign activity within this sector, from wealthy investors from countries such as China, Malaysia and Singapore.
Head of Student Property at Knight Frank, James Pullan expressed his views on foreign activity in the sector and what it means by saying, “They have seen how much others have made from student housing and want to join them. More than 70% of investment is coming from overseas buyers, from sovereign wealth funds and ultra high net worth individuals [people with investable assets of more than $30m] and private equity.”
Andrew Mason from the Student Housing 2017 conference defined student property as a “truly global asset class.”
In 2016 the 5 largest deals in the UK student property sector, worth a combined total of £1.5 billion, were sold to foreign investors. Total investment in this sector that year came up to £3.1 billion, which is more than double the amount traded in 2013 and 2014. The largest deal of 2016 was made by Singapore’s Temasek, the state investment fund, who hold a portfolio of 25 student properties in a number of UK cities including Manchester and London.
Hiew Yoon Khong, chief executive of Mapletree (Temasek’s real estate arm) based in Singapore said at that time, “Student accommodation is a big business and relatively low risk.”
Usually, if investors who turnover millions of pounds each year see the potential in a particular sector, they are not often wrong. No matter where the investor is from, PBSA investment is an easily managed property investment with consistent, at the very least, returns each year.
Even those who are just looking to make a passive income on the side to save for an early retirement can benefit from the student property sector. It is important to know that there are more options than your typical buy-to-let when it comes to property investment and the UK is definitely an area you should want to put your money into.