Private sector investment in student property has been growing rapidly in the past few years. Once only on the edge of most investors’ radar, it is now a popular and high-value sector that gets plenty of media attention. But just what is making student property so attractive to investors? There are a number of factors that entice people to put their money into the sector.
One key factor is the shift in popular views of the student sector. Two decades ago, the sector was an obscure one which most investors had little access to. Now, it is a high-profile asset type and one which many funds hold exposure to. It has also become a sector with a reputation for comparatively high returns and relatively good security. Increasing numbers of university applications have turned it into a relatively high-demand type of property investment, and the impact that the high-profile tuition fee hike had on this a few years ago has now largely faded away. The result of all this is a well-regarded and respectably attractive opportunity for investment.
The shift also results from a change in student attitudes, which has somewhat transformed the sector. Student digs once had a reputation for being a cheap, dismal, low-quality affair. This is partly a simple misconception, drawn from a relatively brief period in the 1990s where existing student accommodation stock was starting to become noticeably outdated and had not yet been renewed or rejuvenated. However, it was also because of tight student budgets historically driving students to the cheapest and most basic properties. The result was a less-than-stellar reputation for the student property sector, both in terms of the quality of properties and the rent that could realistically be charged.
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However, student tastes have changed significantly and modern students are a lot more discerning. They are now keen to secure higher living standards and good-quality amenities for themselves, and they are often willing to pay very respectable prices in order to do so. This has transformed the sector’s reputation, and opened up some fantastic opportunities for investors buying good-quality and well-located properties to achieve very respectable rental returns.
These changes to student tastes have led to a further shift in the market, with purpose-built student housing becoming more popular. These developments contain a number of purpose-built studio flats which have been especially designed for students. They offer premium facilities, prime locations and greater privacy than the traditional approach of adapting houses for multiple occupancy. Well-suited to the needs of today’s more discerning breed of students –especially the growing market of international students – this type of accommodation is becoming significantly more prevalent. As these apartments are sold to investors individually, the result is an increased number of opportunities at more affordable prices.
Following its transformation, the student property sector is also ideal for adding balance to a portfolio. It is a fairly stable, non-cyclical investment with plenty of capital in the sector, making it better-suited to this purpose than many of the other options available.