UK Student Accommodation Investment Driven By Overseas Students and Investors

The UK property market is widely considered a ‘safe haven’ by many wealthy foreign investors, because of the solid property ownership laws and the prestige of owning a property in the UK.

Out of all the various UK property investment opportunities, student accommodation has emerged as a top choice with foreign investors seeking security, high occupancy and strong yields.

Another reason why foreign investors are attracted to UK student accommodation investment is because they know the importance of a good education, with many students from their own countries attending UK universities.

According to the UK Council for International Student Affairs, after Australia, the UK attracts the highest amount of overseas students in the world. The UK aims to see an increase of 30,000 international students enrolling on UK university courses by 2020.

According to Knight Frank the UK is in a strong position to strengthen its place as one of the world’s leading study destinations, especially when it has five of the top twenty universities in the world.

“A UK university education continues to be held in high esteem around the world and this demand is set to expand exponentially in line with global wealth generation.”
– Knight Frank, Student Property Report 2011

 

Majority of overseas Students in the UK are non-EU

Overall, the majority of overseas students studying in the UK are from Non-EU countries. For the 2010-2011 academic years, the total number of non-EU students was 298,110, compared to EU students (excluding those from the UK) which was less than half the amount at 130,115 according to UK Council for International Student Affairs.

The top non-EU countries sending students to the UK are China 67,325, India 39,090, and Nigeria, with 17,585, followed by the USA, Malaysia and Hong Kong with 15,555, 13,900, and 10,440 respectively. Other countries listed include Saudi Arabia, Pakistan, Thailand, and Canada. Interestingly we can see the majority of students are from Asia. source: http://www.ukcisa.org.uk/about/statistics_he.php

 

And these numbers are rising. Data released by UCAS regarding the 2012 January 15th deadline shows that there has been a 13.7% rise in applications from Non-EU overseas students

 

Wealthy overseas investors

Students from Non-EU countries studying in the UK tend to be from the more wealthy families as, in relation to their own countries, the cost of living and education in the UK is very expensive.

That said it is also the wealthy families which are likely to be investors and particularly the higher net worth investors who have enough funds to invest overseas. So it would make sense that they would look to invest where their family members and or friends are studying.

This is reflected in the fact that the customer base for purpose-built student accommodation in the UK includes a very high proportion of overseas students.

 

Jerald Solis, Business Development Manager for Experience International, one of the leaders in UK Student property investment commented.

“An increasing amount of foreign investors from Asian counties including China, Hong Kong, Singapore, Malaysia, and India our buying into our UK student property investment opportunities. This could be partly due to the fact that many of the projects we have sold and currently sell are likely to house a high amount of resident students from Asia. “

Experience International currently offer student rooms for sale in purpose built developments in London, Liverpool, and Bournemouth all of which provide around 10% rental yields per year.

 

Strong Asset Class

Student accommodation is a strong performing asset class and almost unbeatable in terms of returns as occupancy is almost at 100% and Net yields are generally around 10%.

‘The popularity of student accommodation among investors is ultimately driven by consistent occupancy rates of 99% or higher.  The strong demand for purpose-build student accommodation underpins rental growth with a total increase of 34% recorded between 2005 and 2010.’ Source: UCAS

Also some experts would say that student accommodation is ‘recession proof’. As long as we have universities we will have students that need accommodation and during recessions many people decide to go back into education to improve their employment and career prospects, people simply take student loans and grants to fund the expense.

“Student Room Investment outperformed every other commercial property class and delivered consistent returns throughout the economic downturn,” James Pullan, Head of Student Property at Knight Frank commented.
Summary

It is clear that research indicates that there has been a rise in the number of overseas students and property investors in the UK.

These investors are attracted by the prestige of Higher Education and owning property in the UK in general.  As well as the high occupancy levels and rising rental yields which are offered by specialist purpose-built student property projects, investors are provided with the security of UK property law.

Driven by both overseas students and investors, it’s clear that the UK student property investment market is going from strength to strength with many investors purchasing units in purpose-built properties which offer high returns.

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