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Buy-to-let in Student marketplace

Journalist: Emma Simon, Mortgage Strategy

ended 30. October 2024

I'm putting together a feature ofr Mortgage Strategy,  looking at the challenges and opportunities for buy-to-let investors in the student market place. Any comments  and views welcomed, particularly from brokers who  have clients in this market. 

The main areas I'm hoping to address are: :  

  1. Are there opportunities for smaller BTL investors in this area? - ie parents whose kids are at uni, and see this as a way to offset costs. Or landlords with just one or two properties. Or is this market now dominated by larger commercial landlords? 
  2. Do universities insist on any additional standards over and above general regulations landlords must abide when letting property?
  3. What are the main challenges in letting to the student market? Is it seen as higher risk - given the turnover of students and fact property may be empty for considerable periods over summer. Is this reflected in pricing of mortgage products - or more of an insurance issue? 
  4. What are the advantages - assume a ready-made pool of would-be tenants, are yields better than the market average? Are there others? 
  5. Are there specific BTL products aimed at this market - or is it more a case of utilising general BTL mortgage ranges? Would brokers  like to see more specialist products and innovation from lenders in this area?

Any other comments all gratefully received. Obviously I dont' need any comment on a Friday afternoon - but any comments early next week would be appreciated. As ever we are always trying to get a good gender balance when it comes to commentators so any thoughts from female brokers/ lenders particularly appreciated - but we will still include lots of male voice too. 

Many thanks

Emma 

3 responses from the Newspage community

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Editor
Michelle LawsonVerified
Director at Lawson Financial
Student HMO's have been quite a lucrative sector until the onslaught and strangulation of the burdensom red tape and regulation. They are usually easy to manage in comparison to traditional HMO's due to the terms. This is now being threatened by the changes within the Renters Reform Act. Student tenancies differ greatly from most others as they are designed to fit the educational terms. If the notice changes go through it will leave landlords exposed to huge void periods and vacant rooms. The PBSA is being pushed by universities but the wants and needs of the students themselves appear to be ignored. Various sources have been warning the Government of the damage and unintended consequences of the Renters Reform Act, this being one of them, but as with everything else it appears to be falling on deaf ears. There are some great initiatives and products for HMO's and it has potential to be a great sector but some landlords have started diversifying into other HMO sectors.
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Kundan BhaduriVerified
Property Developer and Portfolio Landlord at The Kushman Group
In the student housing sector, we’re seeing a seismic shift. Purpose-Built Student Accommodation (PBSA) is reshaping the market, offering a modern, well-regulated alternative that’s drawing students away from traditional buy-to-let properties. PBSA provides the all-important amenities and social environments students now seek, as well as better maintenance and management. Smaller BTL landlords, especially those reliant on single properties, will face increasing operational challenges. High turnover, stricter regulations, and rising mortgage rates will push many toward higher rents to meet costs, but competition from PBSA, with competitive prices and communal facilities, often edges them out. The demand-supply gap is clear: the UK needs over 600,000 more student beds by 2026, according to StuRents, which signals sustained opportunity, especially in university towns with fewer large PBSA projects. But affordability is key, as students face rising rents while maintenance loans stagnate.
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Kelsey PhillipsVerified
Head of Specialist Lending at Arose Finance
Relatively agnostic of location, student HMOs provide strong rental income cosigned by parent guarantors - it’s easy to understand why historically they have been an appealing investment model for landlords seeking yield. The appeal has only been exacerbated over the last 3 years, during which the Bank of England corroded real UK rental yields by hiking their base rate 14 times to a peak of 5.25%. Many investors have consequently been incentivised to search the country for real yield opportunities – as such, where purchase prices were typically more accessible, we now see demand for certain northern university town HMOs surging. The real art of crystallising higher yield student BTLs lies in securing their valuations; we find surveyors tying fundamentally commercial investments to meaningfully lower residential brick and mortar valuations leaving the investor to bridge the difference between their loan and purchase price, inherently deteriorating their return on cash invested.