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For centuries, the UK has remained an incredibly highly regarded education centre and is home to some of the best universities in the world. Driven by this demand, student property is an incredibly lucrative investment opportunity and has a proven track record of strength and resilience in times of wider economic uncertainty.
Although some predicted that first-time students would defer their first year of university due to the pandemic, UK university admissions service UCAS reported a record number of applicants for a university place for 2020/2021.
With universities transitioning to remote studying to accommodate students, some investors have felt cautious about investing in student property based on the assumption that fewer students will live away from home to study. However, the National Student Accommodation Survey 2021 showed that 88% of students still chose to live in some form of student accommodation this academic year, on average 21 minutes from campus.
But does this high demand for student property reflect all types of student accommodation? Historically, student property investment largely referred to Student Houses of Multiple Occupancy (Student HMO). Today, Purpose-Built Student Accommodation (PBSA) has transformed student property into one of the UK’s fastest-growing property sectors, with investment coming in from all over the world, generating high and consistent rental yields for investors globally.
Before we measure the pros and cons of investing in each type of student property, let’s take a look at the difference:
Purpose-Built Student Accommodation (PBSA)
This type of student accommodation is designed, developed and managed to deliver a high-quality living experience, and has established itself as the strongest student property sector with high demand from domestic and international students. PBSA typically offers a range of amenities including strong Wi-Fi, communal working spaces, building management and security, a gymnasium, event hubs and more. Because these properties are built for purpose, they tick all the boxes of what today’s students are looking for, encouraging retention for the duration of their study period, allowing investors to take a hassle-free approach.
Student House of Multiple Occupancy (Student HMO)
This type of accommodation is a shared student house with a communal kitchen, living area and bathroom. Typically, these are outdated terraced houses, renovated to accommodate as many students as possible, often meaning small bedrooms and living areas. Demand for HMOs is reducing due to the uplift of other high-quality purpose-built options with more space, better facilities and more central locations.
The pros and cons of investing in PBSA
As with any investment, there are risks associated with both types of student property. To help you make the right investment based on your objectives, we’ve compiled a list of pros and cons for each:
Pros of investing in PBSA
Cons of investing in PBSA
Pros of investing in Student HMO
Cons of investing in Student HMO
The key things to consider in any rental market are location, quality and facilities – three factors prioritised by the PBSA sector. Investing in student accommodation in prime cities with Russell Group universities presents a lucrative opportunity with strong potential to drive high and consistent returns.
Select Property Group is the exclusive sales partner of Vita Student, the UK’s leading PBSA provider. With a total of 26 developments in operation or in construction across the UK and Europe’s elite university cities, we’re pleased to say Vita Student saw a 7% year-on-year rent increase across the portfolio from 2018 to 2021, demonstrating the high-demand for high-quality PBSA.
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