Search
Close this search box.

Should you Invest in Purpose-Built Student Property?

February 26, 2020

Share to: 

Article Summary

Manchester
  • In university cities there is a large captive market and demand can be high. University courses typically last around three years and tenants often stay in the same property for the duration of their course.

  • Purpose-built student properties are hard to resell and therefore it can take a long time to get back initial investments.

  • Residential property investments offer similar yields to student accommodation, but have a much higher capital growth and resale value.

Making a property investment into purpose-built student accommodation can seem like an easy way to begin or expand your property portfolio: student buy-to-let investments are often reasonably priced and are advertised as high yield-generating. But are they worth your money? We looked into whether student investments are really as good as they seem.

On the face of it there seem to be a number of positives to investing in a student rental property. In university cities there is a large captive market and demand can be high. University courses typically last around three years and tenants often stay in the same property for the duration of their course. Financial guarantors – usually parents – ensure any missed rent gets paid. But despite these surface advantages, student buy-to-lets are fraught with problems and often not worth the hassle.

Short-Lasting Yields

The first issue is, student pod developers advertise high yields but they do not last long. New, purpose-built student properties are constantly springing up all over university cities, creating more modern, better specification options for students.

Rental guarantees offered by these developers are often misleading and only good for that period. The market rates are found to be much lower than expected once the guarantee has expired. In some cases, the guaranteed rents never materialise at all or don’t last as long as they should.

Purpose-Built Student Properties Are Hard to Resell

Secondly, purpose-built student properties are hard to resell and therefore it can take a long time to get back initial investments. Unlike traditional buy-to-lets, to whom you can sell to the entire market of property buyers, purpose-built student pods are only marketable to cash-rich investors in the student accommodation market. This ensures very restricted capital appreciation on such properties.

The newer student accommodation developments will also seem like more of an attractive investment to this small group of buyers. This creates a lack of liquidity in that these kinds of property investments, resulting in additional stress for property investors trying to sell.

Our Advice

The advice we give our property investors is to first consider residential buy-to-lets. Residential property investments offer similar yields to student accommodation, but have a much higher capital growth and resale value. As well as to other investors, buy-to-lets can also be sold to the wide owner-occupier markets. With a much larger resale market, residential buy-to-lets offer higher liquidity and an easier and quicker sale.

Residential apartments also tend to be larger and are usually one, two or three-bedrooms, rather than the studios found in student pods. This also creates more demand for both tenancies and resale.

If you’re thinking about expanding or beginning your property portfolio, it’s best to start with residential investments.

Share to: 

Related Articles

The Highest Rental Yields In The UK

Here is a list of some of the areas with the highest rental yields in the UK, promising strong returns and rental income for the ...
Read More →

Leeds Named Best Place To Live By Sunday Times

Leeds was named as the best city to live in the North and North East regions by The Sunday Times this year.
Read More →
Yorkshire named one of the world's top destinations to visit

Yorkshire named one of the world’s top destinations to visit

Yorkshire is a standout in global travel, securing third position on Condé Nast Traveller's list of the best places to visit in 2024.
Read More →

Regeneration Projects coming to Leeds – Part 2

Leeds is attracting investors seeking rewarding investment opportunities, becoming a premier UK property investment destination.
Read More →
North of UK Investment

Why Property Investors are eyeing Manchester, Leeds, and Liverpool

Cities such as Manchester, Leeds, and Liverpool are not only cultural and historical gems but also burgeoning property investment hotspots.
Read More →
Leeds property investment

Exploring Lucrative Property Investment Hotspots in Leeds

As the vibrant city of Leeds continues to grow and evolve, it has emerged as a prime destination for property investors seeking attractive opportunities.
Read More →

Come talk to our professionals to learn more about the UK property market now!

Learn more about investing in Manchester by downloading our guide today