Is Student Property a Good Idea for UK Expat and Foreign National Investors?
Stuart Marshall of Liquid Expat Mortgages takes a special 2 part look at an incredibly exciting area for UK Expat and Foreign National Investors: the student rental market. In the aftermath of the COVID-19 pandemic, this sector of the rental market is creating a real stir as expat mortgage requests for student properties have risen considerably over the last six months.
According to Savills, investors spent £5.77 billion on purpose-built student accommodation in 2020 – 5.7% higher than 2019 and the highest figure they have ever recorded. So, investors are confident in the prospects of the student sector being able to deliver strong returns on investment. This is something that UK expat and foreign national investors have taken note of.
One factor that’s been coming up more and more in our recent discussions with potential UK expat and foreign national investors is the student rental market. With the end of pandemic-induced lockdowns and travel restrictions came the resurgence of a student market that is becoming increasingly rewarding for UK expat and foreign national investors. Domestic students are returning to major UK educational hubs to live, many trying to ‘make up for lost time’ after the pandemic brought the social side of ‘the student experience’ to a complete halt. International students are also returning to the UK, with the UK’s exceptional universities and subsequent job opportunities continuing to be attractive to overseas students post-pandemic.
The Student Rental Market.
The surging student demand has meant that there has been an extraordinary growth in rental prices in many areas across the UK student rental market, resulting in an increase as high as 26% in some areas.
Student rentals in the East Midlands have seen the largest growth in rental prices, rising by 26% in the last five years. Student rental growth in the North West and the Yorkshire and the Humber have also seen impressive growth over the same period, rising by 23% and 21% respectively. These increased rental costs are not acting as a deterrent to students either, with student financing and the bank of mum and dad still providing a sufficient incentive to go to university. As a result, demand continues to increase – with UCAS reporting an 8.4% rise in the number of applications for the next academic year – and prices are increasing accordingly.
One other important factor that can’t be ignored when looking at the student rental market is the low supply that the UK property market is experiencing in the student sector. While there is a more general lack of supply in the rental market that is contributing to rising rents, this is also true in the student market. According to UCAS, there are currently 2.5 million students in the UK, and they predict this figure to rise to 2.9 million by 2030. This is a level of demand that cannot be met by supply in the UK. Universities – who own the majority of student accommodation in the UK – cannot cope with the rising demand and so the private rental sector will have to pick up the slack. This presents an excellent opportunity for UK expat and foreign national investors looking to purchase a UK investment property, many of whom are choosing to purchase with the help of a specialised expat or foreign national mortgage.
Why Should UK Expat and Foreign National Investors Consider a Student Property.
‘One of the most important things for UK expats and foreign nationals looking to invest in UK rental property’ says Stuart Marshall, CEO of Liquid Expat Mortgages, ‘is affordability. Student properties are one of the most affordable sectors for UK expat and foreign national investors. Because they are significantly more affordable than standard buy-to-let properties, student properties are an excellent option for UK expat and foreign national investors looking to start their investment journey. What’s more, student properties are also an excellent way for more experienced UK expat and foreign national investors to diversify an existing investment portfolio. A good number of our enquiries have been for buy-to-let mortgages which are based in the city centre or on the outskirts as students want the best of both worlds.’
‘Despite the affordability of student properties, the rental costs remain high due to many of the factors that we have previously mentioned, including high demand and low supply. For this reason, properties rented out to students, consistently achieve yields above 8% for UK expat and foreign national investors. This is an incredibly high rental yield and with the affordability of student properties, they can present a fantastic investment opportunity for UK expat and foreign national investors.’
Another attractive aspect of the student rental property is that it can be a relatively hands-off investment, presenting a robust investment opportunity for UK expat and foreign national investors who have busy working and family lives. Many student property investments are incredibly hands-off because most are run by student management companies who will take over most of the traditional landlord responsibilities that you would have to fulfil if you bought a more conventional buy-to-let property.
‘There are, of course, considerations to be made before purchasing a student property as a UK expat or foreign national investor’ says Stuart Marshall. ‘But no more so than with a more conventional rental property. One such consideration is that if you are looking for a property to appreciate by a large sum, then a student property may not be for you. Because of their nature, the capital appreciation seen by student properties is not typically commensurate with other types of buy-to-let property. However, they do tend to appreciate a small amount and their affordability means that they are still an excellent choice to get started in the rental market. Further, they can be used to fund other purchases, by using the rental income they generate to buy more investment properties or by using equity from the property towards other investments.’
‘To sum up, with the affordability, high yields, and hands-off nature of the investment, student rental properties present one of the best rental opportunities for UK expat and foreign national investors looking to start or add to a rental portfolio. What’s more, with a specialist expat broker to assist with your expat mortgage, there are a wide range of lenders and product options to choose from.’
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
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