News - Landlord Latest News 22/07/2010
Student lets still a good deal
Is student accommodation a sound investment? The answer is yes! I recommend it either as an addition to your existing property portfolio or as your first property investment. Why? That’s simple: it’s a low-risk, high-yield and hands-off investment.
Applications for university places are continuing to rise and there remains a huge shortage of student accommodation, so investment conditions are still favourable. Choose the right letting agent and you’re looking at high rental yields (typically between 6-10% depending upon the property type) and hassle-free ownership.
Estate agents Knight Frank have reported that rents in the student accommodation sector grew by an average of 5% per annum over the six years to the end of the 2009 academic year, with growth accelerating in recent years.
This compares with an average for all commercial property of just 0.6% per year over the same period. Projections for the forthcoming academic year suggest at least a further 5% increase in student rents, while commercial rents continue to stagnate. I think these figures clearly illustrate the robustness of the student letting market.
On the whole, rental yields on student accommodation are higher than on family homes. Research carried out by Knight Frank shows that the yield on high-quality student accommodation is between 6.5% and 7%.
Looking specifically at Chichester, according to figures provided by Chichester University, only 60% of first year students have access to purpose-built onsite student accommodation, which is a relatively small percentage. So, we have a market where demand is high and supply is limited. This is good news for landlords, with conditions ensuring high rents and a steady stream of tenants.
Investors may think that they are buying into a weak market but, as this research shows, rental yields are on the increase and buy-to-let investors have a great opportunity to capitalise on increasing demand for student accommodation, whilst taking advantage of lower house prices.
I believe investors should look at student accommodation as a long-term investment based on high rental returns.
