How the tuition fee hike impacted the student buy-to-let market – Paragon

The beginning of autumn brings with it the migration of 2.5m students to higher education institutions across the UK.

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As the new academic year starts to unfold, landlords might find it worthwhile to do some homework on the potential of a buy-to-let investment in this dynamic segment of the market.

The student rental market has grown considerably over the last decade, with more students going to university. Numbers applying declined slightly in 2012 following tuition fee changes but applications have since bounced back – UCAS figures showed a 3% rise in student applications in 2013.

Recent research by BDRC Continental suggests that although only 22% of landlords are currently active in the student market and 40% say they would never let to students, the experience of those who do is overwhelmingly positive.

Student properties are usually let on a per room basis which means rental yields tend to be higher than for other tenant types.

For instance, yields are 6.7% on student properties compared with 6.2% for properties let to professionals and 5.9% for properties let to young couples. Students are also the least likely of all tenant groups to miss a rental payment and, as rents normally benefit from a parental guarantee, arrears are kept to a minimum.

The negatives when letting to students usually relate to ‘wear and tear’ and, shall we say, over-exuberant behaviour. However, once again, when compared to the overall tenant population, landlords who let to students actually reported the lowest incidence of property damage.

Of course, investing in student property, like any potential buy-to-let investment, should be entered into only after detailed research has been carried out. Student properties also tend to be houses in multiple occupation (HMO) which will often require a licence from the local authority so this needs to be factored into the decision making process.

Despite the decline in 2012 we will continue to see a healthy and buoyant student rental market as it remains a viable, long-term investment.

Paul Clampin is director of mortgage underwriting at Paragon Mortgages

Article courtesy of Mortgage Introducer Buy-to-let Week

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