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The Thriving Student Housing Market

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It’s no secret that the student property market is thriving at the moment, being a much safer area for investment than the conventional sector. For that reason it’s not too much of a surprise that it is seeing an influx of interest from investors from all over the world with an array of recent data highlighting development in the market.

One of the reasons for the thriving market is the fact that student numbers seem to be increasing on a regular basis especially international students who want to benefit from a British education as it is one of the most highly regarded in the world.

Every year more and more prospective students from as far as China and India apply to study in the UK as well as those from EU locations. Those students from overseas also spend a lot more money on their education for both tuition and accommodation and with that increased spend comes the demand for higher quality residences. Similarly, domestic students are now opting for property of a higher quality with the traditional student housing stereotypes of crumbling plaster and pizza box décor looking to be something of the past.

Reports from the Higher Education Statistics Agency (HESA) have recently stated that since 1999 the number of international students in the UK has doubled to 428,225 with student numbers in total increasing by more than half a million over the past 12 years according to HESA figures.

With the increase of students has come the boom of the property market with demand continually outstripping supply with buy-to-let landlords stating that demand for their student property investments is either good or excellent. A survey by but-to-let mortgage specialists Paragon Mortgages revealed that 76 percent of landlords felt that demand was good with 70 percent also stating that they feel that the future will be good for the market.

John Heron, Managing Director of Paragon Mortgages said:  “The student rental market is one of the largest specialist components of the private rented sector. 

“Letting student property is appealing to landlords as they usually benefit from higher than average rental yields as rooms tend to be let on an individual basis.”

Yields for student accommodation tend to average at around 6.3 percent and can sometimes be as high as nine percent in comparison to the conventional buy-to-let market where yields are around 4.3 percent.

Heron added: “Landlords who let a proportion of their portfolio to students are feeling positive about the market and their experience of letting to students continues to be good.

“This is an area of the private rented sector which will continue to thrive as long as the demand for university places continues.”

This year has also seen an increase in the rate of investment in the student property market with the total amount spend almost doubling on a year-on-year basis. Research by CBRE demonstrates that nearly £800m has been invested into student property in the first half of 2012, up from £375m in the same period of 2011 suggesting that investors have taken note of the market’s past successes and are hoping to cash in this year and with occupancy rates reportedly standing at around 99 percent, they are likely to succeed.

Jo Winchester, Head of Student Housing Advisory CBRE commented: “There is no shortage of investor demand, but the market is hampered by a shortage of new high quality development opportunities.”

This further highlights the fact that students now require a quality property and those who are investing for the first time should be looking at investing in the finest properties on the market as they are more likely to be leased. Plus with constant rental increases, landlords will be sure to start receiving their rental returns if they have the best property.

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