Graduates in Cap and Gown

Student accommodation – The academic standing of a university and the re-sale opportunity

We are often asked how important is the academic standing of a university when determining the investment merits of a student accommodation unit close to that institution. Whilst some investors are inevitably drawn to leading universities such as Oxford and Cambridge, whether a university ranks 1st or 100th in academic achievement is not going to influence the success of the unit as a property investment. Demand for places in that university is important, as is whether there is enough suitable accommodation to cater for all its students. Not everyone can attend Oxford, but every student attending university has to live somewhere.

Demand for places in leading universities is growing, but so too is demand for lesser renowned institutions. In 2013 there was an over subscription of 181,000 applications for the 495,000 higher education places available for under-graduate students. This was a rise of 3.6% on the previous year. The demand from overseas students is set to grow as well. In his 2013 Autumn Statement to the House of Commons, the UK’s Chancellor, Mr. George Osborne, announced that an additional 30,000 overseas students will be allowed to enter the UK next year and the following year there will be no limit. This means universities will be free to recruit as many overseas students as they wish and will result in a substantial increase in the coming years. These students have to live somewhere and the supply of new purpose built blocks is not likely to satisfy the growing demand in the long term let alone the medium term.

In summary, its the demand for accommodation in that location and the secure income stream the unit generates that count, not the individual student’s educational prowess or the institution’s academic standing.

Another question we are often asked is whether there is a re-sale market for individual student units. It is certainly fair to say that this is a relatively new sector that is enjoying enormous appeal among individual investors. Most units are bought off plan using a forwarded funded payment method. This means that currently very few established units come on the market. There is a strong demand for established units which are already producing a secure income stream as not everyone wants to buy off plan. In the coming years, as more units are completed and occupied, more investors will have the opportunity to buy these. This will inevitably lead to an active secondary market involving estate agents, financial advisers, web portals etc. Where you have investors seeking immediate, secure rental income and owners who want to sell there will always be people who will step in to help and generate that business. It certainly helps if you buy and then re-sell through a long standing agent that you know will be around in years to come. You should have an established relationship and a high degree of trust with them. In any event, the buyer will probably be a parent of a student or someone looking for a secure and attractive income stream. If the property has a sound track record and is well managed, there will always be a buyer for it.