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Soaring student numbers driving rental shortage

student accommodation investment

This article first appeared in landlordnews.co.uk on 6th April 2016

Record numbers of university students looking for rental accommodation has led to a distinct lack of affordable rental properties. That is the main finding of a report from the Mistoria Group, which says that there is a severe shortage of accommodation for this group.

Highs

Last year, the Government raised the cap on the number of places universities are able to offer by 30,000. This in turn has lead to increased competition between institutions.

According to UCAS, the total number of university applicants reached a record high in the previous academic year. Recent figures show a 3% rise in the number of year-on-year applications.

The largest growing group in recent times was non-European Union students, with numbers rising by 50% in the last decade. There has also been a distinct rise in UK student numbers during the last 20 years.

Competition

Data from SpareRoom.co.uk shows that up to 22 students and professionals competed for each room available in university towns and cities in 2015. Only 40% of rooms in the top 25 UK university cities are available to students.

The most fierce competition was seen in Edinburgh, where 22 people battled for one room. In Oxford, 100 students had no accommodation at the start of the new academic year, with 15 people searching for every available room.

Changing pace

Mish Liyanage, Managing Director of The Mistoria Group observed, ‘unfortunately, university managed accommodation has not kept pace with the growth in student numbers and this is driving increased demand for HMOS and PSBAs in many UK towns and cities.’

‘Traditionally universities were responsible for providing good quality student accommodation. However, over the last ten years, demand for university accommodation has outstripped demand and the private sector has supplemented some of the shortfall, ‘Liyanage continued.

Robust and Lucrative

Liyanage went on to say that, ‘the student property is a robust asset class. Since 2011, student accommodation has outperformed all other traditional property assets and has been the strongest growing investment property market in the UK. It  has continued to be one of the most resilient investment sectors, with rental incomes and property values remaining stable, or increasing. The attraction of the student accommodation sector has been driven by structural undersupply and positive rental growth year-on-year.’

‘Without doubt, the student rental market is the most financially lucrative for investors and landlords if it is managed well. An investor can currently buy a four bed HMO in a good location for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £150,000 in the North West based on 2015 prices.’

Concluding, Liyanage said, ‘Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year.  Typical rents are significantly higher for student properties, than a comparable buy-to-let property in the same city.’

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