Focussing on student rentals could mean high yields

by Sarah Ashcroft

Landlords should be looking to sign tenancy agreements with students as returns soar. According to Knight Frank, strong demand and undersupply means student accommodation should remain one of the best buy-to-let investments this year.

Figures from the firm show rental returns have almost doubled year-on-year in London from 8.4 per cent in September 2010 to 15.1 per cent the same month last year. The capital appears to continue to benefit from the influx of foreign students as the UK universities remain a "global draw".

But it is not just London where returns are good – regional cities with multiple universities are "a sound investment", according to the firm.

James Pullan, head of student property at Knight Frank, commented: "Limited supply coupled with rising global interest in the UK's educational excellence points towards further strong rental growth in the sector.

"The growth in the capital has been fuelled by the particularly robust performance of the core market, and more specifically, accommodation with rents of less than £220 a week. This is also the rent bracket where rooms were filled most quickly, signalling a strong depth of demand."

Cities where there are top universities are likely to benefit most from the rise in tuition fees, according to Knight Frank. It argues that the "flight to quality" means students are more discerning about where they study. Mr Pullman is also confident that student numbers will not fall this year.

"At present, investment volumes over the past year or so would dictate that the sector is very strong indeed despite the introduction of student fees," argues Peter Mindenhall, researcher at IPINGlobal.com. He agrees that interest from abroad is ensuring the UK higher education sector is less susceptible to changes in the rest of the economy.

The important thing for landlords is not to neglect the management of the properties for students. "Returns will be dictated by the management of the properties," Mr Midenhall says.


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Published on: January 17, 2012

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