With the steady influx of new students entering tertiary institutions, there’s usually a solid demand for student accommodation.
As an investor who’s interested in the property market, should you consider student accommodation? We have a look at the perks of the market, as well as how it may change in the future.
Tip: Take out a home loan today to start investing in student accommodation.
Why are student digs a good investment?
According to Scott Picken, founder and CEO at Wealth Migrate, student housing has traditionally been a very good investment class for two reasons:
- Higher than average returns. If you compare it to residential or commercial property, you will notice that student housing offers higher yields, and therefore a higher return.
- Supply and demand. Students who attend university want to be close to campus. However, there’s only so much supply available in the market. This means pricing can be set at a premium, and you will rarely sit with an empty apartment.
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How is the market changing?
Picken says that the world has changed significantly with Covid and he thinks it will be interesting to see the post-Covid reset. He believes there are two possible outcomes for student accommodation:
- Scenario 1: Students and young people continue to enjoy being together because there is a very human need to be in each other’s vicinity. This would mean that student accommodation will continue to be a priority, the same way it has always been.
- Scenario 2: Covid has stimulated the online learning environment and, with the new competition from online learning spaces, the demand for student accommodation may decline.
“When investing, you need to be cautious and look at long-term trends. You need to look at Covid-friendly buildings, the co-living, co-working places, and make sure it has very fast internet,” says Picken.
He explains that Covid has created a geometric shift in societal trends, and all property investors need to be aware of these trends – not just in the next year but in the next decade.
In time, he believes that green and socially conscious buildings will become more prominent since this is what young people will be looking for.
“As always, location is key. Years ago, hundreds of people in Manchester invested in student accommodation which was based 20 miles from campus. However, if you’ve ever been a student, you know that people don’t want to live 20 miles from campus,” says Picken.
He adds that “campus” doesn’t necessarily refer to the place where you do lectures anymore, with learning having migrated to the online environment. Instead, it often refers to where the entertainment and the hub of activity is.
You can start your property investment journey with a home loan.