When deciding to invest in property, it is important to know what type of property investment you want to pursue. By investing in student accommodation in 2025, buy-to-let investors can capitalise on the growing demand for student housing, ensuring long-term, stable returns. In this article, we’ll explore why student accommodation is a smart investment choice in 2025 and how it can be a valuable addition to your property portfolio.
What is Student Accommodation Investment?
Investing in student accommodation involves purchasing residential properties designed to house students. These properties are typically located near universities or colleges, and there are two types of these properties: Purpose Built Student Accommodation (PBSA) or Student HMOs (House in Multiple Occupation).
Developers design and construct PBSAs to accommodate university students. These can be contemporary apartments, studios, or renovated halls of residence. PBSAs are designed to provide modern living spaces that blend comfort, functionality, and social living space together. These typically have shared amenities, such as communal lounges, fitness suites, and outdoor spaces, that aim to enhance the student experience.
Student HMOs are houses or flats that are supposed to accommodate three or more students who will each rent a room and then share amenities such as bathrooms or kitchens. This allows investors to maximise rental income by letting out single rooms rather than the whole property.
What Are the Benefits of Investing in Student Accommodation?
When you invest in student accommodation, there are a range of unique benefits that make it stand out as an attractive option for property investors:
Minimal Stamp Duty
Due to the cost of investing in student accommodation, the cost of stamp duty on these properties is significantly lower than if you were to purchase a traditional buy-to-let property. Student properties are typically sold for less than £125,000, the lowest threshold for stamp duty. For buyers of a second home, the minimum amount of stamp duty owed on property bought under £125,000 is 5% of the total purchase price. This can significantly lower your initial investment costs and enhance your potential return on investment.
High Demand
The demand for student housing remains consistently high and continues to grow. With increasing numbers of students attending university in the UK – over 2.9 million in the 2023/24 academic year – there are more students in need for accommodation. According to CBRE, there will be a shortfall of more than 620,000 student beds by 2029, while Savills reports that 234,000 additional beds are needed right now. This underscores the lack of supply and level of demand for these types of accommodation. As a result, investors in student accommodation will be able to guarantee steady and reliable demand from the student tenant market.
Strong Rental Return
The typical yield for student accommodation ranges between 8-9%, well above the UK average of 5.6%. Additionally, landlords usually charge rents for student properties on a per-room basis, allowing investors to earn more from the property. This is especially true in high-demand locations like Liverpool, which attracts over 60,000 students due to its academic reputation (home to three universities) and vibrant cultural scene. With a combination of steady demand and high rental rates, investing in student accommodation offers the potential for strong returns on investment.
Hands-Free Management
Many student accommodation properties are often fully managed, meaning investors don’t need to deal with the maintenance of the property. A property management company will handle tenant sourcing, maintenance issues, and rental payment collection on your behalf. This makes investing in student accommodation an ideal passive income strategy, minimising your involvement in property management. However, it’s important to note that the property management company typically charges a fee, usually around 10% of your rental income, for these services.
What Are the Considerations of Investing in Student Accommodation?
While investing in student accommodation offers many benefits, it’s important to be aware of a few considerations:
Capital Growth
One limitation of investing in student accommodation is that it may not deliver the same level of capital appreciation as other types of property investments. The primary returns typically come from rental income rather than long-term increases in property value. This is because student properties are a niche market, catering to a specific tenant group, which makes them less versatile compared to traditional buy-to-let properties. As a result, the potential for significant capital growth can be more limited. However, this can be mitigated by targeting areas undergoing regeneration or focusing on locations (such as Liverpool) that are experiencing strong capital growth.
Tenant Cycle Follows the Academic Year
The student housing market follows the academic calendar, with tenant turnover typically occurring at the start (September) and end (June/July) of the school year. This cyclical pattern can lead to void periods over the summer months, although some properties may remain occupied by summer school students or university staff. However, the structure of the academic year provides a reliable foundation for rental income, allowing you to plan your investment strategy accordingly. For example, the impact of void periods is lessened if the student property is one of several in your portfolio, rather than your sole investment.
Competitive Market
The student accommodation sector can be highly competitive, especially in well-established student cities, like Liverpool or Manchester. It is crucial to conduct your research to find properties that stand out in key areas such as location, amenities, and quality of accommodation to ensure that you invest in a property that will yield high returns.
Why Invest in Student Accommodation Over Other Types of Investment?
When compared to other types of investment, investing in student accommodation offers a unique mix of stability and profitability. The student housing market remains resilient due to the constant demand for education, which doesn’t fluctuate with economic conditions as much as other industries. For example, Savills reports that during the 2008-09 economic recession, rental growth continued in the student property sector. Unlike stocks or even traditional residential properties, investing in student accommodation gives you a tangible asset that generates reliable rental income throughout the academic year.
Additionally, with many student accommodation properties offering high rental yields and minimal management requirements, investing in student accommodation provides a hands-off, long-term source of income. Traditional buy-to-let properties do not always come fully managed, and often require the investor to source a property management company themselves. This makes investing in student accommodation a perfect option for those looking to diversify their investment portfolio while ensuring a steady and predictable return on investment.
Student Accommodation Investment Opportunity: Graduation House
If you’re looking to invest in student accommodation in 2025, Graduation House in Beeston, Nottingham, presents an excellent opportunity. Beeston is a lively student area, home to the University of Nottingham, and is experiencing high demand for quality student housing.
Graduation House offers:
- 162 fully furnished, meticulously designed student apartments.
- High-end amenities and IT facilities tailored to students’ needs.
- Prices starting from £99,995.
- A prime location just a short walk from the University of Nottingham.
- Fully managed for a hands-off investment experience.
With such a well-located, fully managed development, Graduation House offers a compelling opportunity for those looking to invest in student accommodation in 2025.
Why You Should Invest in Student Accommodation in 2025
As we approach 2025, investing in student accommodation remains a top choice for those looking to generate reliable and long-term income. The high demand for student housing, strong rental yields, and minimal management responsibilities make it a standout option compared to other forms of investment. While the potential for capital growth may not be as high as other property investments, the stability and predictability of rental income make student accommodation a valuable addition to any investment portfolio.
If you would like to invest in student accommodation to expand your portfolio, contact us today. Advantage Investment will provide you with a personalised, tailored consultation, and will help guide you to the right investment for you.
