However savvy investors now associate UK property investment with the rapidly emerging student accommodation sector which is providing extremely healthy returns.
UK student accommodation has thrived over the past two years, rapidly outpacing the UK’s conventional property market. Its fast growth and investment strength has been so prolific that in January 2012 The Times ranked student accommodation as the top asset class in the UK’s property market.
In fact when compared with other residential and commercial property, student property stands out as consistently offering higher returns for investors. 2010 saw student property offering annual average returns of 13.5% in a market where commercial property grew by just 8% and standard residential property fell in value by 1.3%.
Recent research carried out by buy-to-let mortgage specialist Paragon Mortgages shows that students generated the highest yields for landlords in 2011. Using independent research from The Landlords Panel from BDRC Continental, the lender found that students generated an average yield, followed by young singles and retired people. At the other end of the scale, non-housing allowance benefit claimants generated the lowest yields, followed by young couples and manual workers.
Average returns across the UK were 11.5% in 2011 and Knight Frank expects total returns from student property to increase in 2012 to 12% with rental yields growing by 5%.
Commenting, Mark Stott from Select Property, said: “The popularity of student accommodation amongst investors is ultimately driven by consistent occupancy rates of 99% or higher and a structural undersupply, particularly for higher quality accommodation. And this is set to increase, potentially offering even greater returns for savvy investors.”
Knight Frank’s 2012 student property report added: “It [student accommodation] has outperformed every other commercial property class and delivered consistent returns throughout the economic downturn.”
To read the full report click here.
