Student property investment experts are warning of the potential for falling student numbers to become a long term problem, affecting the long term yield potential of specialist student property investments, especially those serving lower-class institutions.
In its report, Spotlight on Student Housing Autumn 2011, Savills Research have identified 24 institutions as "first" and "upper-second" class. It says that investment in accommodation serving these institutions will continue to flourish, benefiting from their "international appeal and a reputation for academic excellence", as well as high proportions of full-time, non-EU and postgraduate students.
Marcus Roberts, Savills head of student investment said: "The top-tier universities are expected to continue to attract demand, while charging maximum fees. This will maintain the competitiveness of these institutions, compared to the rest of the UK.
"We anticipate that funders, developers and investors will wish to target future growth in these locations. Investment is possible in most locations but target initial returns have to be significantly adjusted in view of future growth prospects for different towns and cities."
Meanwhile those in the lower-second and third classes will be "locked into a downward spiral of reduced funding, negative student demand, decreasing inward investment and declining academic quality".
Another strength of properties surrounding the best universities according to Savills is their potential for dual-usage rental opportunities, primarily from tourists. One example given was Edinburgh, where there is the potential to let student accommodation to festival goers. Against the backdrop of rising tuition fees likely to be a long term problem, this is something that student investors should be on the lookout for.
In this respect it is beneficial that the properties near the best universities, which have the best potential to continue doing well from student lets, are also those with the best chances of attracting additional and possibly higher yielding rentals from tourists. This is because it narrows the field for investors to choose suitable investments.
- Monday 05 December 2011