Views on student accommodation lending
How likely is this area to become more popular in the future?
How big of a market could this become?
How could this market develop further?
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6 responses from the Newspage communityCopy all
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Whilst student lets and Houses in Multiple Occupation (HMO) properties remain some of the best yields for landlords, there are questions around the future demand for university places as many will be weighing up the growing costs of attending against the benefit of the degree obtained. Also due to the cost of living, more and more students are now attending a local university and continuing to live at home with family, so there is less demand for student lets in many university towns which have previously relied heavily on this market demographic.
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In prominent university cities like Bristol, the demand for student accommodation is not only substantial but also appears sustainable in the medium term. The evidence lies in the significant ongoing construction of purpose-built student housing and the consistently high demand for private student accommodation. Furthermore, local authorities have shown considerable support for this trend, frequently granting change-of-use permissions for cherished buildings to meet the growing demand.
The appeal of student housing investment lies in its potentially attractive returns, particularly in cities where conventional rentals may face pressure from rising interest rates, eroding rental profits. This has led many homeowners to explore the transformation of their properties into student accommodation, capitalising on the robust demand in this sector.
The appeal of student housing investment lies in its potentially attractive returns, particularly in cities where conventional rentals may face pressure from rising interest rates, eroding rental profits. This has led many homeowners to explore the transformation of their properties into student accommodation, capitalising on the robust demand in this sector.
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This area forms a part of our advice process - we are often found advising parents on their options for purchasing a property for their studying sons and daughters who can then manage the property for Mum and Dad and take on fellow students with them renting any available rooms. Does the market need any new specialised facilities from lenders, we are not sure it does - the scenario fits quite well with a number of lenders as it is.
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This has always worked well in the areas near to big colleges and uni's. They are a sound investment as usually the terms get paid upfront and most of the landlords will ask a parent to be the guarantor. Once the paperwork has been signed, they are legally bound by it. Very few voids with this type of letting. If you were to start this line of business, I would advise a careful plan first. Take a walk from the house to the uni and see how long it takes. If its more than a 20-30 min walk, consider another property.
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The need for student accommodation keeps growing, unlike in the 70s and 80s, when school leavers were encouraged to find a job, and only around 5-15% of students went to university, that has grown significantly to around 37.5% of school leavers going to university in 2022.
It is therefore natural for students to require more student accommodation, many, but not all universities have Halls of residence for first-year students, therefore it is more common for students to seek private accommodation.
It is therefore natural for students to require more student accommodation, many, but not all universities have Halls of residence for first-year students, therefore it is more common for students to seek private accommodation.
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If you believe what you read in the news there is a massive shortage of student accommodation, particularly in certain universities where there are more students than residences. This presents a golden opportunity for landlords to invest in this niche area where demand outstrips supply.