As students prepare to head to university this month, new research shows a drastic decrease in student housing. What’s happened to the student rental sector, and what must landlords be aware of?
Universities across the UK are struggling to accommodate their growing number of students. According to Savills’ latest research, a quarter (24.5%) fewer homes are available to let across the UK’s top 30 student cities compared to pre-pandemic levels. This is despite a 6.3% increase in full-time students in the same period.
London boasts the most purpose-built student accommodation in the UK, yet there are 3.8 students for every bed, exceeding the 2.9 UK average. Furthermore, the capital’s private rented sector has almost a third fewer properties available to rent compared to pre-pandemic, and rents have increased by 12.8%.
This trend extends to more regional universities. For example, Durham has seen three-bed property listings decrease by a staggering 41.8% and four-beds by 32.4%. Canterbury has seen the highest annual growth in its number of full-time students, increasing by 24.1% between 2020/21 and 2021/22. Yet, it has suffered a 33.2% reduction in student lettings compared to pre-pandemic levels. Bath follows suit, with an 18.7% rise in student numbers since 2020 but a 35.2% decrease in rental listings.
What this means for student landlords
Consequently, increased competition for rental properties continues to drive up rental prices. The Savills report found that 10 out of 30 cities have seen double-digit annual rental growth. For example, since the pandemic, Glasgow, Salford, and Nottingham saw significant rental growth at 33.5%, 29.3%, and 28.9%, respectively.
According to the research, the UK has a record number of full-time students, at 2.3 million, 91,000 more than last year. Increasing demand for student accommodation and fewer properties being let out to students mean this is a crucial time for landlords to be looking to invest in suitable student properties.
While a typical student HMO may not initially remind you of good quality housing, new research suggests tenants expect much more from their house shares. With 47% of all HMO tenants being students, landlords can maximise their rental yields by offering top-quality accommodation in prime-demand areas.
Challenges facing student landlords
As students battle against housing shortages, student landlords have their own challenges to face.
In the highly-anticipated Renters’ Reform Bill, periodic tenancies will replace fixed-term tenancies. A periodic tenancy is a rolling tenancy agreement with no set end date. Whilst this offers tenants and landlords increased flexibility, many industry experts and property investors raised concerns over how these would work in the student market.
The primary concern for landlords will be whether tenants leave the property in time for new students to move in at the start of the academic year. If not, the current student rental market problem will be exacerbated further, reducing the supply of properties available drastically.
The Government’s plans for the student market and periodic tenancies remain unclear. However, landlords can look to university towns and cities across the UK as their next property investment location. It’s evident that demand for student housing will only continue to grow, and these cities will undoubtedly generate significant demand from young professionals who stay in the area after graduating.
If you are considering diversifying into your first student let or would like to explore your options for your next property finance plans, contact our brokers on 0345 345 6788 or submit an enquiry here.
6th September 2023