Student graduate

The top place to invest in student housing for robust returns

Appetite for student accommodation is high, with demand exceeding supply across the UK, and good yields can be made by savvy investors.

According to research from Simple Landlord Insurance, the top university for investors to net the highest yields from student accommodation is the University of St Andrews in Scotland. The university, which is where Prince William studied, could offer yields of as much as 12%, according to the research.

The study looked specifically at popular Largo Road, where large houses cost an average £300,000, and with five students each paying an average £150 a week, the annual rental income is £36,000.

At the bottom of Simple Landlord’s league table, Oxford would provide an average yield of 3.3%, with a property on Iffley Road in the student district costing an average of £720,000 and bringing in around £2,000 a month rent.

Investment in student property is on the rise, and seemingly undeterred by Brexit. Research by Savills suggested £5.3bn will have been poured into student accommodation investment by the end of this year, and the estate agent saw £2.1bn of investment after the referendum result, up from £1.9bn.

There has also been a 2.2% rise in applications from overseas students outside of the EU since last year.

In total, 564,190 people applied to UK higher education courses for 2017, so the demand is strong for student property.

Opportunity in the north

According to Mistoria Group, demand in the north-west of England was up by 38% year-on-year, and managing director Mish Liyanage touted Liverpool as a top opportunity because of the shortage of student digs there.

“Shared student accommodation in Liverpool gives investors excellent yields,” said Liyanage. “There are many areas of Liverpool that are ideal for student property investment such as Kensington, Wavertree, Toxteth, Kensington Fields.

“Investors can acquire a high quality, three-bed HMO…from £120,000 onwards. An average room in an HMO can be rented for £85 per week including bills, but ensuites can be as high as £110 per week. The return on investment is very attractive too, with 13% (8% cash rental and 5% capital growth).”

Liyanage also advises caution for those looking to invest in student pods – individual rooms or small pods – rather than the traditional larger, shared properties.

“A major disadvantage of student pods is their resale value and capital growth potential. The value of property will fluctuate with the market and the pool of potential investors is much smaller than for other types of student accommodation, such as HMOs and flats.”

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