UK Property Development & Investment News - Alliance Investments

Purpose-Built Student Accommodation in high demand

Written by Alliance Investments | May 31, 2019 4:00:00 AM

Since the rise in tuition fees back in 2012, the expectations that students have of their university experience have changed. They believe more than ever that all elements of university should represent good value for money – including their accommodation.

Whereas previous generations of students would have had little to no choice but to settle for poor quality accommodation provided by their university, or live in a house of multiple occupation (HMO) on the outskirts of town with several of their peers. Today’s students expect a living experience that enriches their time at university, allowing them the independence of living away from home whilst also offering them the chance to mix with their friends and classmates socially.

Therefore it is no wonder that a recent student satisfaction survey has indicated that students living in private, Purpose-Built Student Accommodation (PBSA) have been impressed with their living experience during university, with 76% of the 70,000 students involved, stating they were happy with their decision to move into this ever popular type of accommodation.

PBSAs Vs Traditional HMOs

While the rise in tuition fees can be cited as a reason for a shift in expectations when it comes to university living experience, it is certainly not the only reason. PBSA is almost always brand new developments, situated in prime central spots, making it easy for residents to access their university and local amenities, bars and restaurants.

The facilities within the developments are also significantly better than the alternative living arrangements, with most developments offering social hubs, private study rooms, games rooms, laundry facilities, bike and parcel stores, as well as super-fast WiFi.

Compare this to the traditional offering of HMOs which are normally large residential buildings converted to house up to 12 people, all sharing one kitchen and a handful of bathrooms at best, and it is easy to see why PBSA has scored so highly with the modern student market.

The unattractive location of HMOs as well as the number of people sharing them is not the only downside to this traditional type of student accommodation. Rogue landlords of HMOs have been the subject of strong criticism, having become renowned for providing poor living conditions for students. It will come as no surprise that 63% of students value living conditions within their residence, but in 2018 alone, 40% of students living in traditional privately rented accommodation were living with damp and mould, while 20% reported insect infestation and vermin. Additionally, electrical and gas safety standards were compromised, with these issues leading to 36% of students feeling anxious or depressed.

The impact of living experience on a student’s well-being

There is a philosophy that positive surroundings can breed positive results. This is demonstrated by 99% of students who indicated that they felt that the quality of their accommodation could impact their well-being and educational performance.

One of the additional benefits for students living in PBSA is 24hr access to high-response, professional maintenance teams to ensure that any faults are addressed and fixed quickly. Students are provided with the peace of mind that maintenance can be completed efficiently, and potential breakages will not be a long-term problem.

Conversely, students living in private rented houses, such as HMOs, must report any problems to their landlord; who are responsible for structural repairs, as well as problems with heating, boilers, and sanitary installations. The resolution time for students living in PBSA far surpasses that of HMOs, with the latter often experiencing long delays.

PBSA and value for money

One of the top concerns for many students is the cost of their accommodation, with many of them having to use their student loan to cover living expenses. Therefore it is no wonder that 97% of participants in the UCAS Student Accommodation Survey indicated that value for money is viewed as important; an additional 50% said that they considered costs to be ‘very important’. As well as all of the facilities and amenities within PBSA being covered by a student’s monthly rent, water, gas, Wi-Fi and electric are also included, an added incentive not offered by HMOs.

PBSA vs HMO: An investors perspective

As well as being an outdated concept for students, HMOs are now becoming increasingly unpopular with landlords as well. With the on-going maintenance costs associated with ageing properties as well as having full responsibility for resolving any issues, many landlords are looking for a more hands-off and hassle free option, whilst still being able to make strong returns from the UK’s buoyant student accommodation market.

Not only are PBSA developments fully-managed, alleviating any of the stress associated with owning a property, but they also have the potential to generate more of a profit than HMOs and are a significantly lower initial capital investment. Prices within the PBSA sector start from between £70,000 and £80,000 – a lot less than a traditional residential property. Many PBSA developments also offer investors assured returns upwards of 7% NET, with these rates fixed for a set period of time.

Unlike HMOs, PBSA has not been affected by Mortgage Interest Relief Cuts, due to the PBSA market being largely cash-only. Additionally, the government are constantly under pressure to make sure there are enough affordable homes available in the residential market for first-time buyers and young families. Properties previously purchased by landlords with the intention to convert into HMOs are exactly the kind of properties the government want to be more readily available to owner-occupiers, so there are many incentives to encourage investors to stay away from traditional properties and to buy properties such as PBSA instead.

Introducing ‘The Met’: Luxury Student Apartments in an undersupplied University location

The Met is a brand-new PBSA development currently under construction in the centre of Newcastle-Under-Lyme, and is being created to meet the needs of the town’s thriving student population.

Keele University, Staffordshire University, and Royal Stoke University Hospital are all in the vicinity of this managed, fully-furnished development. In addition to 211 high-class studio apartments, the building contains high-quality communal spaces, enabling residents to socialise in style across the ground floor and mezzanine level.

Apartments in The Met start from £73,500, with a guaranteed rental yield of 7.5% per annum for five years.

To find out more, get in touch with one of our property investment experts today.