Student property beats buy-to-let yields

Photo credit:   Tulane Public Relations

Indeed, the average buy-to-let yield for a UK landlord sits at 6.1 per cent gross, down 0.1 per cent on 2012, notes Go Global Investments, but the investment firm reports yields of 7 to 9 per cent from university accommodation.

Peter McDermott, Director of UK-based Go Global Investments, comments: “These latest figures from Countrywide Residential Lettings show that despite Generation Rent, where the number of people renting from a landlord has doubled to 8.5 million in 15 years, gross rental yields are sticking around the 6 per cent mark. Once you factor in void periods, tax implications, maintenance costs and chasing unpaid rent, the financial appeal of being a buy-to-let landlord loses some of its gloss. This is why serious serial UK property investors are coming to us to discuss student housing where, for example at our Leeds project, they’re assured a minimum 8.1 per cent net for five years.”  

Indeed, the student property sector has become an increasingly mainstream asset class for investors. On, student projects from Southampton to Liverpool ranked among the most popular property listings consistently throughout 2013.

The CBRE Student Accommodation Index shows returns of up to 9.95 per cent in the 12 months to September 2013, the best performance from any asset class, beating even office, industrial and retail property. The CBRE report did not factor in capital growth in the improving housing market, which would push potential returns higher.

“Student accommodation now has a proven track record and its success is underpinned by exceptionally high tenancy rates of 98 per cent plus, alongside a chronic undersupply of dedicated housing in most top university cities across the UK,” continues McDermott. “Applications to UCAS from outside of Europe, particularly the Far East, have seen average annual growth of 8.5 per cent between 2007 and 2013 and this is a target audience for safe, quality accommodation within easy reach of campus. This asset class is also recession-resistant as the number of university applicants tends to rise in an economic downturn, as they postpone a career in order to gain more qualifications.”     

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