InFocus: International investors seeking out the UK’s student property market

Global investors are keen to buy into a market that has been consistently identified as the investment industry’s most secure and profitable asset class.

Property consultancy Knight Frank recently highlighted the international potential of the UK’s student accommodation market, stating that it is outperforming all other asset classes this year, while fellow property expert CBRE found that total investment in UK student accommodation is on course for a third consecutive year in which investment surpasses £2 billion (3.64 billion Canadian dollars).

International investors, including those from Canada, are sitting up and taking notice. In the past two years, overseas investors have more than doubled their presence in the UK’s student accommodation market. Back in 2011, non-UK buyers accounted for 23% of total investment, at the start of this year they were the majority stakeholders, making up 52% of total investment.

This obvious appeal is born out of the perfect amalgamation of several factors.

Nationwide market

The diffuse nature of the student market offers a huge scope for investment. Unlike many other UK property asset classes, student accommodation has excelled itself outside of the high asking prices seen in London. Almost 90% of the £2.1 billion invested in 2013 was spent on regional schemes across 30 different towns and cities, with locations such as Bristol, Manchester, Sheffield and Newcastle providing investors with multiple opportunities to tap into strong rental prospects and high yields.
Calibre and reputation of a British education

With some of the most recognised, respected and sought after universities in the world – the UK is set to become a major beneficiary of the mass international migration of students. OECD data shows the global population of international students doubled between 2000 and 2011, growing from 2.1 million to nearly 4.5 million, while ongoing growth suggests the current number is actually around five million.

International student destinations are also changing. In 2000, the US had a 23% share of international students, but this fell to just 17% over the next ten years. During the same period, the number of international students flying to the UK has increased by almost 100% from around 1.9 billion in 2000 to 4.25 million in 2013 – a figure set to continue on an upward growth pattern for 2014 UK university admissions.

Critical undersupply and growing student demand

To underline the estimated rise in the number of international students choosing to study in the UK, the British government recently announced it will be removing the cap on student numbers –allowing an unlimited amount of young people to enrol in a demand-driven university system.
Even at current student levels, many university cities in the UK are chronically undersupplied with purpose-built student accommodation. Prime investment hotspots like Newcastle have one bed for every five students studying in the city. The issue is exacerbated by recent legislation that allows councils to stop landlords from converting traditional housing into student houses.
Investments made in purpose-built accommodation are seeing the benefits of this existing undersupply, with students flocking to their residences.  

North American investment

Such is the appetite for UK student property investment, international purchasing is happening on a corporate and personal scale and North American investors are becoming increasingly involved. Companies with relevant backgrounds are bulk buying. Greystar recently purchased a portfolio of assets worth £310 million from the UK’s Opal Group, while on a smaller scale individual investors are keen to get their own returns.

Ayaz Davidson is a 42-year-old investment banker from Toronto who has been investing in property since he was 18 and a student at McGill University in Montreal.
He opted to invest in a Vita Student residence. Part of the Select Property Group, Vita Student is the only proven and credible student property investment in the market, having sold and delivered 1,000 properties across seven developments, with 100% occupancy from year one.

The unique Vita Student concept puts students at the heart of everything it does, delivering more than just luxury property in prime locations. Vita Student focuses on student experience and this ideology has resulted in astounding uptake from students and assured high returns for investors.

Due to rising house prices in Toronto, Ayaz was searching for a new property investment in December 2013.

He said: “The proposition of high-quality student accommodation, assured high yields and a relatively low entry point meant that Vita Student at Portland House in Exeter was very appealing.

“I have always invested in the very highest quality products as I believe that it pays dividends in the end. The level of specification that Vita Student offers makes sense as the products stand out from the market and it means that the accommodation will be really attractive to overseas students.

Ayaz added that the fact the investment is fully-managed is ideal for overseas investors and after purchasing in January 2014 he is set to receive 7% rental returns annually for five years.
Click here for more information on Vita Student’ latest development in Newcastle – Savills’ 2014 UK Investment Hotspot

***Select Property Group

Select Property Group is the UK’s largest retailer of investment property. With more than 9,000 properties sold in over 100 countries, the Group has a well-earned reputation of delivering successful investments in both emerging markets and also through the identification of niche opportunities in more established markets.

With over ten years’ experience, the Group’s success is built up on a clear vision to develop market leading brands that are instantly recognisable and cannot be replicated. Underpinning each brand is an unswerving commitment to the end customer, delivering products which are relevant, authentic, and different. By adopting this approach the Group guarantees occupancy levels in its properties, thereby driving the yield and value of its investments. 

Click here for more information on Vita Student’ latest development in Newcastle – Savills’ 2014 UK Investment Hotspot

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