Investment: student property market
Over the last ten years, the UK student property market has increased significantly. Attracting an increasing number of investors into the market, of which, a significant number are from China.
The number of students living in the UK – in particular international students – has had an impact on the student property sector, which has resulted in a shortage of suitable accommodation. Unfortunately, universities have been unable to keep up with the demand which is why the development of new properties, has in many cases, become a sector for private sector investors from across the world to get involved in. And China is one them.
China is the world’s second largest economy. And as a county, part of its plans is to expand its overseas property portfolio.
The Chinese cleverly understand the student property market’s potential and where real investment opportunities lay. As the sector can deliver much higher rental yields than other property models, which is why Chinese investors are creating bigger and bolder developments in different parts of the UK.
Changing the approach
Traditionally, Houses in Multiple Occupation (HMOs) have been the focus of residential property investors. Benefiting from multiple rents and the financial consistency this brings. But costly maintenance obligations and changes in the rules resulting in landlords unable to deduct 10% of net rent from their profits to cover wear and tear, has meant that many have been looking at alternative options. One of which, and popular with investors from China, is self-contained purpose-built student apartments.
Chinese investors have done their research and can see how this model of working is best in the sector, as these fully-managed schemes offer better rental returns and remove common difficulties usually associated with managing student property. One of the main reasons these projects are so popular with Chinese investors is because high-quality apartments are still a fairly new concept in the marketplace and therefore come with a demand from overseas students. This is why the student occupancy rate tends to be high, which helps to protect future rental returns.
China and the North West
China’s investment property portfolio is evident in many big cities across the UK, including North West cities of Manchester and Liverpool. Both cities have solid business property relationships with Chinese investors, something which is set to continue: growing stronger. You can find out more information about properties in the North West here at RWinvest.
In particular, Liverpool’s ties with the East have a real heritage, as the city has a significant linear in its own Chinese community – and is one of the oldest settlements of people in the city’s history. Liverpool has seen plenty of investment from the Chinese. One of the city’s big property developments backed by investors from Hong Kong and China is the 488 luxury student apartment, known as the Paramount building – some of which is currently under construction. Its developments like this and others up and down the country, which beg the question… why is the student property sector so popular with Chinese investors?
There are plenty of reasons, one of which is the way long-term property investment performs in Britain. Traditionally, Britain has been able to assure long-term capital gains for foreign investors because of the way the property market has performed over the centuries. And because its tax structure and property regulations are transparent: giving overseas investors security. Add to this, the way rental yields in the student property market are performing it makes perfect sense for savvy investors, whether in the UK or overseas, to act on what is a very appealing sector with a rewarding return on investment.
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