Students leaving HMOs to move into favoured PBSA will drive returns for investors and increase stock levels in the UK property market.
- There are 11 buyers chasing every new property in the UK, underlying the lack of supply in housing markets
- Students want to live in high-quality PBSA, but shortages in university cities force many to live in HMOs, taking away stock from both the owner-occupied and private rented sectors
- Investment in student property not only generates high returns, but alleviates the strain on the rest of the market
Could stock level shortages in the owner occupied and private rented sectors of the UK property market helped to be solved by student property?
There are currently 11 buyers for every new property that comes onto the market in Britain, according to new research from haart. That increases to 20 buyers in London, as the supply of properties reduced by 13.8% in the UK in the year to June.
Figures from earlier in 2015 suggest that only a third of the 75,000 news homes Britain needs each year are being built to keep up with demand, from both first-time buyers in the owner occupied sector, and from property investors in the private rented sector (PRS).
“The only solution to this is to unlock the market and free up supply,” declared Paul Smith, Chief Executive at haart.
One way that supply could be freed up is with the development of purpose-built student accommodation (PBSA).
Over £4 billion was invested into the UK’s number one asset class in the first six months of 2015, with investors recognising the demand from today’s increasingly international student body for quality PBSA.
But there are critical undersupplies in university cities across the UK, which will not be solved in the long or short term. Glasgow, for example, can only guarantee PBSA for 10% of its 80,000 students, while almost 70% of students in York can’t access PBSA. This forces many into homes of multiple occupancy (HMOs), properties that are not only unsuitable for students, but that also are taken away from buyers and sellers in the UK’s other property markets.
Investors should focus on student property as it has proved itself to be a stable asset that generates high yields. Then as HMOs are unlocked, activity in other markets will begin to pick up.