Are you considering investing in property? If so, student property in the UK is an attractive investment option worth considering.
The higher education sector in the UK is flourishing at a rapid pace, with the UK Parliament reporting 2.86 million students attending institutions between 2021/22 alone, creating a significant demand for quality student accommodation.
1. Resilient and growing market
The UK's higher education sector is experiencing steady growth, with a rising number of students enrolling each year with the 2022/23 academic year seeing over 2.3 million undergraduate applications, reflecting the consistent demand for higher education.
With Savills reporting the number of higher education applicants could reach 1 million by2030, forecasts indicate both a robust and resilient market for student property investments, offering long-term stability with a 7%+ rental growth expected for 2023/24.
2. ConsistentRental Income
One of the main advantages of investing in student property is the consistent rental income it provides. With students typically signing fixed-term contracts for the academic year, this ensures landlords have a steady stream of income for the duration of the lease.
According to a report by Knight Frank, purpose-built student accommodation in the UK achieved an average occupancy rate of 92% for the 2021/2022 academic year, further highlighting the reliability of rental income, while also calculating the total value of the UK student market at around £72 billion.
3. HigherRental Yields
Investing in student property in the UK often yields higher rental returns compared to traditional residential properties. Purpose-built student accommodation has consistently outperformed other sectors in the UK property market, delivering net yields ranging from 4.5% to 6.5%, according to a study by Savills. The demand for quality student accommodation in prime locations near universities allows landlords to charge higher rental rates, maximising the potential rental yield.
4. Potential for Capital Appreciation
The student property market in the UK has experienced significant capital appreciation in recent years. House prices in university towns and cities have increased by an average of 22% over the past five years, according to data from Zoopla.
The combination of growing demand for student accommodation and limited supply in popular locations has contributed to the upward trajectory of property values, providing the potential for long-term capital appreciation.
5. Tax Benefits
Landlords of student property in the UK may be eligible for tax deductions on expenses such as property management fees, maintenance costs, and mortgage interest. Additionally, the UK government's Rent-a-Room Scheme allows individuals to earn up to £7,500 tax-free per year from renting out furnished accommodation in their main residence. These tax benefits can enhance the overall profitability of student property investments.
6. Diversification and Portfolio Stability
Including student property in an investment portfolio can provide diversification and increased stability. Property, particularly student accommodation, often exhibits a low correlation with traditional asset classes, such as stocks and bonds. This characteristic means that student property can act as a hedge against market volatility and economic fluctuations, offering stability to an investment portfolio. By diversifying your portfolio with student property, you can potentially enhance risk-adjusted returns.
Investing in student property in the UK in 2023 offers several compelling advantages. A resilient and growing market, consistent rental income, higher rental yields, potential for capital appreciation, tax benefits, and portfolio diversification make it an attractive option for investors. However, thorough research and due diligence are essential to identify prime locations, understand local market dynamics, and assess potential risks. By carefully considering these factors, investors can capitalise on the opportunities presented by the thriving student property market and potentially reap long-term financial rewards.
If investing in student property is an asset you’d like to explore, get in touch with a member of the Elavace team today to discuss your opportunities with an experienced market professional.
