Should Landlords Worry About Brexit’s Effect on Student Property Investments?

For buy-to-let landlords looking for something a little more exciting than traditional flats or terraced houses, student accommodation has become an increasingly appealing option.

Long gone are the days of dirty, damp properties for students in many parts of the country. Instead, many expect accommodation of comparable quality to the graduate workforce; clean, bright and well-maintained. If such accommodation offers additional services – such as wifi, laundry rooms or cinemas – then all the better.

And as student demands change, so a new breed of landlord has emerged, keen to fulfil these desires. These so-called “purpose-built student accommodation” rooms (also known alternatively as “pods” or “PBSA’s”) have grown in popularity among investors, who appreciate that the growing student population offers a ready source of reliable rental income.

Indeed, according to the Financial Times “there are more investors in the sector than there ever have been”, with last year posting historic transaction values.

Of course, it’s not just the large student population, with their changing requirements, which are presenting opportunities to investors, but also the low cost of entry. While many traditional buy-to-let investors are stumping up large six-figure sums (requiring sizeable deposits) to purchase properties for private tenants, student accommodation is often available far more competitively.

Some companies are now offering student accommodation investments for less than £50,000 – opening up this opportunity to a far wider range of potential investors.

Despite all this positive news, some experts are of the opinion that further change could be on the horizon. For one thing, these shiny new student pods seem to be particularly favoured by international students, who perhaps are used to different standards than British students of days gone by.

Such students don’t just have unique expectations; they often also are well-funded by wealthy parents back home, willing to spend considerable sums of money to ensure that their children are housed in the style to which they are accustomed.

Spending a sum equal to many members of the graduate workforce is certainly not out of the question for such individuals, while student landlords are happy to tap into such a lucrative and reliable source of funding.

That said, there is concern among some experts that Brexit could affect this affluent foreign student population. Of course, it is likely to be months – if not years – until British landlords feel the full effect of the government initiating Article 50. All the same, potential student landlords might take a moment to consider the potential effects of such a move in the future.

Fortunately, the evidence suggests that the largest international student populations actually come well outside the EU. China, for example, “far exceeds any other nationality” according to the UK Council for International Student Affairs (UKCISA). Students from India come second.

Consequently, it seems unlikely that a change of policy in the wake of Brexit will have any significant effect on the overall foreign student population. Indeed, if – and it’s a big “if” – European students were no longer permitted entry to the profitable UK higher education system, then it seems possible that these gaps would soon be stemmed by students from elsewhere.

At this juncture it is also worth noting that student numbers continue to increase year-on-year, growing by a further 3% last year, hitting a record high that shows no signs of abating.

With historically-low interest rates set to continue for some time into the future, many traditional sources of capital growth are sadly looking ever less appealing. At the same time, the evidence suggests that the student accommodation investment market is likely to remain strong for the foreseeable future, and offers potentially far more lucrative returns than many other vehicles.

While the intelligent investor will always stay abreast of potential changes on the horizon – be that financial, legal or political – in truth there is never a perfect time to invest. All we can do is to educate ourselves and make informed decisions based on this research.

If you’re looking for better returns on your money than a stale-old savings account or cash ISA then you might just want to consider the possibility of investing in PBSA rooms as a potential way to grow your capital more robustly.