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02 June, 2017
One area of property investment by foreign investors that is currently performing strongly is that of student accommodation. As many other areas start to flounder, we ask what the appeal of student accommodation is for these investors?
With fears surrounding Brexit impacting on many investments, it is perhaps surprising that student accommodation has seen significant increase in investment. Whilst university applications from UK and EU students have dropped, there are massive levels of investment anticipated when it comes to purpose-built student accommodation, and this has been heavily boosted by international investors.
Overseas Investment Despite the EU referendum, student accommodation investment has not been impacted. Far Eastern investors are particularly involved, due in part to an influx of Singapore backed money. The Asian investors have been attracted by the well-established and easy to understand nature of the UK higher education sector.
Yearly tenancies create a strong annual rental growth that can be relied upon, however there are worries that foreign students may be caught up in new UK immigration targets. If students remain exempt to the rule, numbers will rise greatly again.
Whilst buying off-plan, fixed price property with a non-refundable deposit is not ideal for every kind of investor, this is something which overseas investors can do easily. The ability to buy a number of properties that will be continually re-occupied on a yearly basis offers a good return on investment in a relatively stable area of the property market.
When the time comes to sell up, it can be sold to another similar property investor, and as it is likely to hold its value, investors know their money is safe.
Investment Areas Whilst London is usually top of any investment tables, it seems that areas such as Exeter, Guildford and Leeds are actually good sites of investment due to the low supply levels of accommodation for universities attracting large numbers of new students. Cities such as Liverpool have seen worries about the oversupply of property force them down the rankings.
It is possible that many investors are opting for areas that they know are popular with students from their own part of the world, as they know this will be a site of continued growth.
The Student Property Market Whilst many recent changes in tax laws and stamp duty have put a lot of property investors off, many are moving towards student property as it offers healthy rental yields from low investment prices. The ability to invest in student property through a limited company maximises the returns, and the provision of rental managers for purpose-built student blocks takes away a lot of the typical landlord headaches, although they do come with their own fees.
Student accommodation is not typically thought of as something to attract foreign buyers, but its stability and continued appeal means that investors are buying in large numbers with confidence, as universities fill their places and need increasing numbers of homes for the students they take on. A good deal is still a good deal in any language.
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