Demand for student housing in the UK is expected to increase over the next 12 months, offering opportunities for buy-to-let investment. The supply of student accommodation is more than twice as much as it was four years ago, with 602,000 bed spaces, according to research by Cushman & Wakefield estate agency. Rents have also risen by 2.9% from 2016 to 2017.
The report also found that annual studio rents in Manchester rose by 5%. This city has the biggest student population outside London. Student rents also rose by 4% in Bristol and Birmingham, and 3% in Manchester, Edinburgh and Nottingham. Predictably, the highest rents are in London costing an average of £195 a week. By comparison, in Manchester the average weekly rent is £142. Sheffield has the cheapest rents, with a weekly average of £120. The supply of new developments is dominated by private investors, who developed 87% of new beds in this academic year. Universities remain the biggest suppliers of student accommodation and run 57% of rooms available for students. Overall, 56% of the student market is for en-suite bedrooms, with studios accounting for 12%.
David Feeney of Cushman & Wakefield said it was encouraging to see the market flourishing for student accommodation, despite concerns over Brexit and the rise in tuition fees. He said en-suite rooms or shared accommodation are a cheaper alternative to studios, while also allowing students to be more sociable, as they have communal spaces. He said there is a real potential for investors and developers to meet student demands for affordable, quality accommodation and supply the rooms that students want. The demand for accommodation is continuing to grow, with 4% more full-time students than in the academic year 2012/13. The relatively weak pound means overseas students continue to be attracted to British universities. About 23% of students in the UK are from abroad. These students are fuelling demand for quality accommodation and are prepared to pay for good rooms in a central location with fast internet.
In the past few years, purpose-built, privately-run student accommodation has been built in many university towns. Altogether, 287 new private halls of residence opened at the start of the present academic year, with London and Sheffield seeing the biggest increase in private accommodation. Research by Savills shows Bath is the top hotspot in the UK for the development of student accommodation. This is due to high-occupancy levels, good rents and the potential for growth. The second best place for growth is Birmingham, with Bristol, Brighton, Exeter and Edinburgh all performing exceptionally well. Leeds and Guildford are also seen as good areas of investment. However, London remains the largest UK city for students and research suggests the full-time student population in the capital will soar by 50% in the next 10 years.
A study by Simple Landlord Insurance shows that the student accommodation producing the highest yields is at the University of St Andrews, in Scotland. Its research shows yields could be as high as 12%. The research looked in particular at Largo Road in the city, which is a popular student area. Here, large houses cost around £300,000. With five students paying an average of £150 a week, the annual rental income from one property will be £36,000.
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