Five key factors for smart student housing investments

A lack of development opportunities in larger cities coupled with high construction costs and interest rates can make finding the right assets to buy or develop particularly difficult. Even though the UK’s purpose built student accommodation (PBSA) market is unfailingly popular with investors (attracting £2.45bn  investment in H1 2024, compared to £1.3bn in the same period in 2023) it is important that you make time to fully understand which development market is suited to your business and if PBSA is right for you. In this sponsored post, John Carter, commercial director for commercial real estate at Aldermore explores five points that can help you make your decision.

Refurbish existing PBSA

Investors and developers may overlook the usefulness of repurposing first generation PBSA stock, due to them usually being on the smaller side. However, you’ll find that a lot of these older assets are in locations that are desirable for investors wanting to grow a portfolio and can simply be upgraded to be more favourable to students.

The demand for high-quality student accommodation remains, and operators have seized the opportunity to buy these buildings at a lower price to then refurbish and increase rent once completed. As a lender, we’re seeing firsthand that other investors and developers are jumping on this trend, so it would be worth a consideration.

Future proof your asset

When it comes to investing in PBSA or deciding what type of property to build, there’s now more data at your fingertips than ever. Students are demanding more, from top-tier amenities to eco-friendly features, and these factors are rapidly shaping their choices.

Yes, tailoring properties to these expectations might cost more upfront, but let’s make it clear: it’s a smart move. Future-proofed assets hold their value longer, especially in competitive markets, and can generate higher rents.

At Aldermore, we back investors and developers who really know their target market, because understanding the unique needs of different UK regions and universities is key to staying ahead.

Know your students

Investors and developers can now use data to track changing student demographics. There are three main PBSA markets to be tapped into: UK students, post-graduates, and international students.

Recent government changes limiting international students from bringing family could shake up demand, especially for universities that rely heavily on them for income.

With some universities already financially stretched, we can see the importance of digging into their reliance on international students. Spotting these financial weak points helps investors focus on the most profitable markets and build the right PBSA assets to meet demand.

Take advantage of change

In cities where there’s a severe PBSA shortage, rents are being driven up in the residential market. A slow planning process is a major contributor to this, but with the new Labour government looking to overhaul the planning system, this could open doors for the sector. Speeding up planning and approvals can help to get the right properties in the right locations and ease pressure on both the PBSA and residential sectors.

Additionally, a more rapid planning system can help to lower development costs and speed up delivery, potentially shifting supply and demand. Investors will need to stay sharp and monitor any changes to capitalise on new opportunities.

Understand the landscape

While the UK economy is more stable than it was 12 or 24 months ago, uncertainty still lingers. One wildcard is the impact of the June abolition of multiple dwellings relief (MDR), which is still playing out. Higher purchase costs could lower asset values, but that depends on the quality, location, and management of the property, along with potential rental growth.

Aldermore, with its deep financial expertise in PBSA, serves as a one-stop shop for developers and operators. Partnering with the right financial backer can help investors seize opportunities in the evolving PBSA landscape.

To find out more about how Aldermore can help you to get your PBSA plans off the ground, please visit our website.

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