Student property – UK’s top performing asset & your retirement

on Apr 20, 2015
Updated: Oct 17, 2019
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With one in six over-55s expected to use this month’s pension reforms to fund a buy-to-let property investment, for many now begins the process of finding the perfect property to purchase, one that will generate strong, monthly returns for their retirement.

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An established asset, the buy-to-let market is currently in rude health. The average UK rental rate in March was 10.2% higher than it was last year, with the annual rate of growth in regional UK property hitting record levels. The reason is that there is a sustained demand for rental property and a significant undersupply of it.

But whilst the overall picture is rosy, there’s one property sector in particular that’s outperforming all others. Welcome to student property, the UK’s top performing asset class.

In the past three years, £6.6 billion has been invested in student property. Gone are the days of the typical run-down student house of multiple occupancy (HMO). Today’s scholar wants a high-quality, experience-led purpose built student accommodation (PBSA) property and, with a critical undersupply of it, they’re willing to pay more for it.

So what makes it such a good investment choice for your retirement?

Higher yields than any other property type

That demand for the best PBSA has seen investors enjoy better monthly return levels than any other type of UK property. Students want more from their university experience, and living in the best property can be a huge contributing factor in achieving this. They are willing to pay a premium for features such as 24-hour security, high-speed internet access, and cutting-edge communal facilities. As a result, investors can achieve yields of around 7% annually.

A proven track record of stability and growth

As other assets struggled and left investors frustrated, the student accommodation market produced positive rental growth throughout every single year of the economic downturn; you could say it is recession proof! PBSA is a non-cyclical asset, meaning that it is not impacted by some of the external factors that other asset types, such as bonds and equities, or even other property investments would be hit by. As long as a British higher education remains popular, so will the demand for PBSA.

Record student enrolment numbers

Speaking of which, the number of people wanting a place at a UK university is up. At the start of the 2014/15 academic year, there were 659,030 student applications to British higher education institutions, up by 4% from the previous year. And it looks like there’s more good news on the way. With international student numbers having grown by just under three million in the last 14 years, and with the uncapping of enrolment numbers in September 2015, the opportunity to invest in an asset that will house this growing student body becomes even more attractive.

High demand, low supply

The reason that many students have to reluctantly rely on rundown, unsuitable HMOs is that there is a significant undersupply of the kind of quality PBSA that students today are crying out for. Popular Russell Group university cities such as Glasgow, Newcastle and York, for example have less than 10% of their student population living in PBSA, simply because there isn’t enough of it. For investors, this continued misalignment between supply and demand levels has driven average rental values up by 3% annually.

Get it fully managed

You won’t even need to become a landlord with student property. Unlike other property types, student property is a completely hands off asset. Let your PBSA provider do the hard work of finding tenants and maintaining your property, whilst you sit back, watch your monthly returns come in and enjoy your retirement.

Select Property Group has published a guide for savers considering a buy-to-let investment following the pension reforms, ensuring that it is right for their personal circumstances. .

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