With students starting the new university year shortly, and student accommodation lets filling up again, now might be a good time to look at the future for the student property market.
Student property has long offered a good opportunity for property investors. Student property can be cheap to invest in, yet offer excellent yields – often many times higher than an ordinary family let.
But what will Covid-19 mean for the student property market? Should you keep investing or stay invested in student property?
Let’s look at the current situation on the ground right now: To some extent it’s business as normal, with student halls and student houses being occupied once again. The market seems like it has been fairly resilient.
But – it’s important to remember there could be something of a delayed reaction in the student market. This year’s students applied for their university place around a year ago, before Covid-19 even existed.
The question student property investors need to ask is: What will students considering applying to university this year and over the next few years decide to do?
It’s likely interest in going to university will remain strong. In fact, with rising unemployment in a recession interest could actually rise. It may be more important than ever in future to have a degree.
One snag could be if universities decide to make online learning, or so-called blended learning, more permanent. Some students might decide they no longer need to move away from home, or that they could live and learn pretty much anywhere not just in a university town.
A positive is that the desire to move away is still very strong amongst young people. Today, the importance of what is known as the ‘student experience’ can’t be underestimated.
Investors will need to keep an eye on what happens this academic year, however. Any further lockdowns, or university shutdowns, could seriously dent confidence in the market amongst this and next year’s 18 year olds – and their parents.
This BBC article looks at Coronavirus: What’s Happening With University Admissions? It might offer some clues as to what will happen with student accommodation next year.
Investors probably need to consider that the student accommodation market won’t necessarily be affected the same everywhere in the country. Those cities with lots of foreign students could be affected more, as students from other countries might be more wary about going to live and study abroad. In particular, those places where there is already more student accommodation than is needed are likely to be affected more. The market in places which mainly attract UK students, and/or where accommodation is in short supply, might not be affected too much at all.
The PBSA (purpose built student accommodation) sector could be heavily affected. PBSA operators have built thousands of units in some cities in recent years. Their accommodation is often priced at a premium and they will find it hard to use the accommodation for anything other than students. Private student landlords, on the other hand, usually have a price advantage in the market and can be more flexible.
So what should student property investors, landlords and agents do at the moment?
Should you buy student property investments? Only the most optimistic investor would see this as a good idea. Then again, there could be some bargains to be had from investors who decide to exit the market.
Should you sell your student property investments? Again, it’s difficult to see how right now would be a good time to sell this kind of asset, unless you really have to.
Consider diversification. It could be advisable to consider what else you could use your property or properties for, depending on their type and location.
Smaller properties could be converted to single family lets or let to two/three sharers. The yield probably won’t be so good, although the work involved is likely to be much less too.
Larger properties could be let as shared houses/HMO’s to the wider population other than just students. Serviced accommodation or Airbnb type lets could be a possibility. Also consider the contractor accommodation market. Lots of areas have major construction projects ongoing or planned.
Consider the market for letting to tenants on benefits: Sadly more people are likely to be claiming benefits in the future, so this is likely to be a growing sector. While letting to tenants on benefits is a sector many landlords have avoided in the past, and it can involve more management work, your income is or should be reliable and yields in this sector can be just as high as for student property.
Staying in the student accommodation market. Lastly, student investors, landlords and agents who stay in the market should keep a close eye on developments. Keep tabs on what your local universities are doing and what their application levels are for next year. Keep tabs on what interest/demand levels for accommodation are like. Keep tabs on what other landlords and the PBSA operators are doing. Look at what you need to do to keep your property occupied or keep it competitive in the market.
Have a ‘Covid policy’: Amongst other things decide what you’ll do if you have cases of Covid-19 in your property, and what you’ll do if universities have to close again and students want to leave your accommodation early.
The National Code from Unipol Student Homes has some really useful (if lengthy) guidance on how student accommodation providers can deal with Covid-19.
The only certain thing right now is that everything is uncertain. So landlords who keep on top of everything and try to stay ahead will have the best chance of success in the years ahead.