How student-friendly property became the UK’s most resilient and recession proven asset

Properties that are popular with students were one of the few investment assets that increased in value and demand during and after the financial downturn of 2008, with a chronic shortage of student housing driving demand over the following decade and causing the Purpose-Built Student Accommodation (PBSA) sector to “come of age” and increase from $0.8bn investment globally in 2009, to a high of $7.2bn in 2013, according to property agent Savills.

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Student-friendly property increases in demand and value during 2008’s economic downturn

During the financial downturn of 2008, properties rented in the UK by students were one of the few investment assets that increased in value and demand. In an article published in 2014 after the economy had somewhat stabilised following the economic volatility caused by the financial crash 6 years prior, Savills outlined that student-friendly housing had “consistently been one of the best performing sectors during the global downturn” as the number of students in the UK “significantly outpaced supply”. This was due to “a surge in student numbers as jobs became scarce and the recessionary tendency for workers to up-skill took hold” which, in turn, increased the demand for properties that were favoured by students.

In an article from 2009, news agency Reuters published a prediction from property experts that expected the average rents for student-friendly housing in the UK to rise by “about 10 percent” in 2009 as demand began to outstrip supply. In actual fact, average rents between 2009 and 2010 increased by 12% as student intake for the 2009-10 academic year increased by 70,000 students in just one year. In comparison, there are currently 2.75 million students studying in the UK with the average increase each year for the last 12 years sitting at just over 20,000 additional students each year.

As the West were “riding out” the recession, the influx of wealth across Asia “fuelled the international student market”, meaning more Asian students were seeking English-language education and entering the UK to study. With the levels of wealth increasing amongst this demographic of student, this meant that they were seeking “higher standards of accommodation” and the quality of properties that were popular amongst students increased significantly, which is still a current trend in the market today.

The UK is currently experiencing a student accommodation crisis

In 2022, the UK is already currently experiencing a student accommodation crisis, where there are simply not enough student-friendly properties to house the student population. The Financial Times recently published an article that detailed the country’s “structural undersupply of student accommodation” and stated that the “expansion in the UK university sector has collided with a shortage in rental housing” as the annual admissions to university have increased by 65% over the last two decades, while the supply of housing has dramatically failed to keep pace.

“Last month, Manchester University offered £2,500 to freshers within commuting distance who were able to switch from living at university to living at home, in an attempt to increase the number of places in halls.” The Tab.

There are reportedly now 2.4 students in the country for every 1 room in the PBSA sector, with the UK having only 700,000 rooms in PBSA for the 2.75 million students across the country. Being in a student accommodation crisis where demand is already increasing faster than properties can be built, entering into a time of economic uncertainty where people historically choose to enter higher education more often, and the incredibly high number of students who deferred their university experience during the COVID-19 pandemic finally being ready to begin their studies, will cause demand to increase exponentially and drive the level of investment into the sector to new heights.

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What does this mean for investors?

When looking to invest your capital in a time of economic uncertainty, properties that are popular with students are the most resilient and recession proven asset in the UK market that can provide opportunities to investors that can not only protect your capital, but see it grow in value.

When looking to invest in student-friendly property, it is essential that you consider the following:

Location

Investing in a property that is popular with students will not prove to be profitable if the city in which you’ve put your capital is not in demand. By investing in cities with leading universities, high student populations, and an exciting social scene, you will be ensuring that your investment is rented consistently with little to no void periods. When choosing apartments to invest in within these cities, it is also important to select investments that are close to the universities, in the city centre, and not far from the available amenities – allowing you to ensure that your tenant is happy where they are located and does not have to commute far to their lectures or social events with their friends. At Beech Holdings, every property we develop is located in an area with proven high demand and undersupply, close to everything the city has to offer, and where our tenants have fed back that they are interested in living.

Management

When looking for a property investment, it is important to ensure that you choose an opportunity that offers you full management of your investment, otherwise you may find yourself becoming a full-time landlord. This could involve formulating tenancy paperwork yourself, taking calls from your tenants in the early hours of the morning when their boiler is leaking, or even having to chase tenants for their rental arrears on your own. At Beech Holdings, all our properties come with the option to be fully managed by our in-house lettings and property management team, meaning you can truly become a hands-off investor and reap the benefits, hassle free.

Ease of costs

When searching for the right investment opportunity, investors should look for a company that provides a simple and easy lettings experience to its tenants, with just one fee for them to pay that is inclusive of their rent and utilities. The student population notoriously prefers ease when renting, and by providing a service where they only have to worry about one payment each month will make your property easier to rent, and consequently, more profitable. At Beech Holdings, our model for tenants allows us to provide an all-inclusive rental package that has just one payment each month that covers the tenants rent and utilities, which is opted for by 100% of our tenants.

Size

Most importantly, when considering a property investment, you should consider what your target audience is searching for. Students are not looking for large 2-bedroom homes with a garden, instead, opting for small compact properties that will save them rent and allow them a nice place to live, whilst spending the majority of their time in lectures, out with friends, or on a night out. Every year, our in-house lettings team rent out all of the studios and one-bedroom apartments in our portfolio first, as these are the most searched for and most popular property type amongst students and are the fastest to rent each year.

For savvy, switched on investors, there are options available right now in the student-friendly UK property market that could not only protect your capital during times of uncertainty, but see it grow in value.

To learn more about how you can capitalise on the current market and secure your capital throughout the period of economic uncertainty that we are entering, get in touch with our team today.

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