Why letting agents should target the student accommodation market?

A new year is now upon us, and there are a number of reasons for letting agents to embrace 2019 with a sense of positivity and optimism.

Despite the various challenges posed – including Brexit uncertainty, the upcoming ban on letting agent fees and increased regulation for landlords – there are still considerable opportunities for letting agents and the properties you manage on behalf of your landlords.

One in particular is the student accommodation sector, which is booming despite the ongoing Brexit negotiations leaving foreign students uncertain over their future in the country.

According to a forecast by Knight Frank’s Student Property team, more than 29,000 additional purpose-built student beds are set to be delivered this year – bringing the UK’s total to over 600,000.

What’s more, Knight Frank predicts 2% rental growth in the student market for 2019.

Diversifying to create alternative revenue streams

With the fees ban set to come into play at some point this year – potentially April 2019, although it could be later than that – letting agents have been urged for a while now to seek alternative streams of revenue.

One possible way of doing so is to offer expert advice and assistance to institutional investors, who may lack expertise in the actual nitty-gritty of letting property. Knight Frank’s findings say that – regardless of Brexit - North American and Asian institutional investors will continue to dominate the UK purpose-built student accommodation market in 2019, with the strongest demand for acquisitions coming from the United States, Singapore and Hong Kong.

Partnering up with a domestic property management specialist may be something these major investors seek to do, and your agency could stand to benefit and recoup some of the potential losses that the fees ban could bring.

“Despite Brexit, global investors continue to acquire PBSA assets in the UK, fundamentally underpinned by the UK’s world renowned higher education system,” James Pullan, global head of student property at Knight Frank, said.

“The asset class offers a stable income stream, with strong year-on-year rental growth prospects. When compared to more mature asset classes, such as the offices sector, PBSA is standing out.”

Stable income and strong rental growth

As outlined above, the student accommodation sector offers certain advantages: namely steady, stable rental income and good levels of rental growth over time.

High demand plays a part in this. While this demand is directly linked to the university calendar, it is guaranteed during term-time and replenished at the start of each academic year. The chances of void periods during term-time are slim to none, while rooms can be let on a temporary basis to other people during the holidays when many students head home.

Of course, no investment is without risk or possible downsides, and the potential cons of the student rental market have been well-documented. The risks are often overblown – and, with students now paying much more for their degrees, they are often prioritising work over play – but landlords should expect their homes to receive a bit more wear and tear if they let to the student market.

This could affect the capital gains they make on their property further down the line, although a home in a busy student area is likely to attract a lot of interest (and a good price) if they decide to sell at a later date.

As we can see from the above research, rental growth in this marketplace is also strong – which should increase the chances of your landlords achieving excellent rental yields.

In times of uncertainty, investing in a stable market is a pragmatic move. With this in mind, you may want to steer your landlords towards the student market for the strong returns and stability it is likely to provide.

Student rents on the rise

A survey recently carried out by student housing charity Unipol and the National Union of Students (NUS) found that the average price of UK student accommodation has increased by nearly a third in six years, driven by a greater demand for upmarket properties.

In 2011, according to the Accommodation Costs Survey 2018, the average rental bill took up 58% of the maximum student loan; now it’s 73%. There is now a greater demand for studio flats – up from 4% in 2012 to 9% now – with fewer students opting for traditional abodes with shared bathrooms and kitchens.

There has been a rise in the number of student beds provided by the private sector, too. It now accounts for half of all student accommodation – up from 39% in 2012 – while the rest is made up by educational institutions. The opportunities for student landlords now, compared to even seven years ago, are much higher as the private rented sector plays a greater role than ever before in housing those studying at university.

Tech-led solutions for a tech-savvy demographic

To effectively target the student market, you need to have a slick, user-friendly website and an all-in-one, cloud-based software system which enables you to manage all aspects of your business seamlessly, at the click of a button.

Student tenants might be searching for properties via your website, which is where multi-faced property search facilities become so important. A detailed property description is also vitally important, giving would-be tenants plenty of information about the home they might soon be calling their own.

Next generation features such as free virtual reality tours and free video tours could also help to get more eyes on your landlords’ properties, which will please them no end and increase their chances of getting tenants in place.

What’s more, 24/7 customer portals can help you keep landlords and tenants alike happy, contented and fully up to speed with all they need to be up to speed with. A landlord portal, for example, is a place where they can share documents and view inspections reports or invoices, while a tenant portal can help to simplify the tenant sign-up process, allow them to report repairs online and enable them to pay rent remotely and then view their account statements afterwards.

To find out what Gnomen can do for you, you can call 0208 123 9019 or book a free demo here.