Over the last 10 years, the UK’s student accommodation investment sector has become a stand-out choice for property investors.

Once a niche asset class, the popularity of student property has seen the market segment now worth £51 billion (Knight Frank). Its rise to prominence in recent years has been partly due to the sector’s evergreen nature – come rain or shine, there will always be university students and a need for accommodation to house them close to their chosen university campus.

Globally known for its academic excellence, the UK is home to some of the best-ranked universities with 90 included in the QS World University Rankings 2021. With 4 UK universities are ranked in the global top 10, the education system is particularly appealing to international students.

The latest data released by UCAS has shown that there are 2.4 million students currently enrolled in universities across Great Britain, and this amount is forecast to rise by an extra 500,000 students by 2030 (JLL).

With so many positive factors, student accommodation has emerged as a good investment for investors and landlords who want to secure a reliable rental stream from a fully managed property.

As UK university applications increase as a result of an increase in the 18-year-old population, there is an increasingly positive outlook for student property yields.

With the UK opening up and people adapting to the ‘new normal’, 97% of universities plan to teach courses in person in 2020/21.

For student accommodation investors, yields should be robust as demand for housing increases in line with an uptick in student numbers.

Town Square Invest’s student property investment opportunities provide investors with an assured rental yield for a predetermined time, meaning that investors will generate a return whether their unit is occupied or not.

Since this guide was written, the UK residential property market has seen significant change. As a result of the cost-of-living crisis and turbulence in the financial markets after the September 2022 mini-Budget, conditions became more challenging for investors. However, the market has remained surprisingly resilient and many indicators now suggest that the outlook may be improving.

Capital Growth

In March 2023, ONS released its January house price index, which showed that the year-on-year rate of growth had slowed to 6.3%. This is slower than during much of 2021 and 2022 but, as many commentators have discussed, this represents a slow readjustment towards longer-term norms. There was no price-crash as some pundits had suggested and instead, the market has continued to be characterised by resilience and a good deal of stability. This is underpinned by an enduring imbalance between intense demand for property and very restricted supply. As a result of this imbalance, many sources expect capital values to return to growth in 2024 and to remain on an upward trajectory thereafter.

Rental Values

Despite the cost-of-living crisis, rental values have grown very quickly, more or less in line with inflation, which was running at just over 10% in the fist quarter of 2023. In March and April, different sources quoted growth rates of between 8% and 11%, with even higher rates in certain towns and cities.

Interest Rates

The Bank of England announced a succession of rises in the Bank Rate in 2022 and 2023. In March 2023, it climbed to 4.25%. However, while the base rate was rising, lenders were actually cutting some of their rates. As the dust settled after the mini-Budget, market competition prompted banks and building societies to introduce more attractive rates. Moreover, in April 2023, the IMF announced that it regarded the current inflationary conditions as a short-term aberration and expected natural interest rates to fall slowly across all developed nations. The forecast, which extends as far as 2050, suggests that investment conditions could improve steadily over the next decade and beyond.