The number of students in the UK has grown rapidly in the 21st century, opening up a lucrative new market for private landlords who have the opportunity to capitalise on the increased demand for accommodation.
In 1997, the total number of students in the UK in further and higher education was 1.8 million. By 2007, the number had risen to 2.5 million, and by 2016, it had almost doubled to 4.5 million – this figure included 2.2 million students in colleges of further education and 2.3 million students in higher education at university.
Why has the student market grown?
More students are taking up further and higher education places partly as a result of government initiatives for young people aged 17 to 30. The number is expected to continue rising as teenagers are encouraged to enter further education and training courses, rather than claiming unemployment benefits. In addition, the number of foreign students studying in the UK has risen by 67% since 1997 – they now account for 21% of the total student population.
There are around 680,000 full-time students living in houses of multiple occupation, known as HMOs, with a further 495,000 students living in halls of residence.
The amount of purpose-built student accommodation hasn’t kept pace with the increase in the number of students, which has led to a rise in the number of students living in HMOs and at home with their parents. This means there’s a gap in the accommodation market that private landlords can fill.
Best place to buy property
If you’re a landlord looking to enter the student accommodation market, it’s important to consider a number of factors before buying property to rent.
The proximity of the property to the college or university is probably the most important consideration, since not all students can afford cars. So, the ideal property should be within walking distance.
The majority of students are looking for value and convenience, so if you can keep your rent below that of other similar properties in the neighbourhood, you shouldn’t have any problems finding tenants. Most students are living on student loans and notoriously low wages from part-time work, so giving them the best value for money is important.
Another consideration is the close proximity to public transport, pubs and shops. Provide clean, functional and basic accommodation – the property doesn’t need to be ultra-modern, as long as it fulfils these simple requirements.
How much is the average rent?
Rent costs vary significantly across the UK and they are usually influenced by the relative property prices in the area. However, rental fees are also affected by supply and demand. When there are more students and property is in short supply, the rents will be higher. In areas where there are less students, or more university halls of residence, the rents will be cheaper.
Rent for the average student in Oxford is £137, but at the other end of the scale, it’s only £87 a week in Newcastle. The average rent in northern cities is also relatively high – in Manchester, it’s £131 per week and it’s £129 per week in Liverpool.
The rents in Scotland are generally mid-scale – weekly rent on average in Edinburgh and Glasgow is £106. In Cardiff, Wales, it’s £94 per week.
Benefits of letting to students
Student accommodation needs to be clean and safe, but not state-of-the-art, so older properties and those with multiple rooms are ideal. It follows that yields can be high, as there may be more tenants in student accommodation, with living rooms converted into bedrooms, for example.
If you’re close to a university, it’s usually easy to find student tenants. The situation of supply over demand looks set to continue, so rents are likely to rise further over the next few years.
Also, if the tenancy isn’t working out, you’re not committed to a long-term contract, as students move on quite quickly once their education has finished.
Disadvantages of student lets
Student accommodation tends to attract lower capital appreciation than other kinds of properties. Maintenance bills can be higher than average, but this can be offset by the fact you don’t need to spend the earth on décor to start off with.
When signing up tenants, most student can’t provide a credit reference and will have no credit history, so you won’t know whether they will pay regularly or not. If they turn out to be noisy and disruptive, you may face penalties from the local authority, should there be complaints about them from neighbours.
During the summer holidays, you may have a gap when there are no tenants. Also, due to the continuing lack of student accommodation provided by universities, the number of private landlords offering student lettings is increasing, so the market may not be as lucrative.
What to do to minimise risks
Liaise with the college or university and take only those students who are recommended to you, providing a “safety net” for the landlord, as the students’ place at university could be at risk if they misbehave.
If your tenant can’t provide references from an employer or a previous landlord, or their banking history, ask for a guarantor (usually a parent) to accept legal and financial responsibility for the tenant.
When your tenants move in, draw up an agreement containing a clause that stipulates if one tenant leaves mid-term, the others must either find a replacement or meet the total costs of the rent themselves.
Also, provide them with an information pack, not only containing helpful information about local amenities, but also listing their responsibilities. This can cover noise nuisance, caring for the property, refuse removal and more.
Also, list a detailed inventory of all the items provided in the accommodation and the condition of the walls, floors and furniture. Make it clear that tenants must leave the property as it was when they moved in or pay for redecoration or repairs in the event of any damage.
In general, students can be a reliable source of letting income. As they have a limited choice of where they can live, they are a captive market and are generally undemanding and easy-going tenants.
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