Most students are looking for the best value and the most convenience. If you can keep your price below that of most competing landlords, you will be in demand.

September 2, 2014

The number of students in Britain has risen dramatically in recent years, from 1.8m in 1997 to 2.5m in 2007. As the government pursues its target of getting 50 per cent of 17-30 year olds into higher education by 2010 (it's currently about 40 per cent), these numbers will rise further.

The state of the market

The growth of student numbers has partly been due to government initiatives encouraging more young people to study, but also to more foreign students coming to Britain. Participation of foreign students at universities has risen by 67 per cent in the past ten years. This trend is expected to continue, with foreign student numbers rising from 15 per cent of all students in 2008 to 21 per cent in 2018.

At the moment, there are around:

  • 495,000 student beds in halls of residence
  • 680,000 full time students in Houses of Multiple Occupation 
  • 259,000 full time students living at home with their parents

Both the number of students living at home and those living in HMOs has risen sharply in recent years, since the amount of purpose built student accommodation has not kept pace with the rise in student numbers.

This leaves a gap for private landlords to fill.

Advantages and disadvantages

On the plus side:

  • Student accommodation need not be state-of-the-art. Older properties with multiple rooms are ideal.
  • Yields can be high, since there may be a more tenants in a student let than usual (students don't mind using a living room as a bedroom).
  • It is generally easy to find student tenants, if you are reasonably close to a university.
  • There is an excess of demand over supply, so rents are expected to continue rising in the coming years. Between 2003 and 2007 rents rose by 17 per cent.
  • By the nature of students, they will move on, so you are not committed to long-term contracts.

On the down side:

  • Student accommodation attracts lower capital appreciation than other types of property.
  • The rise of purpose built private student accommodation, to subsidise university halls, is gradually reducing the demand for private lettings.
  • Maintenance bills will probably be higher than average, but then you don't need to provide top-end furniture and décor in the first place.
  • Students generally can't provide credit references.
  • You may have a gap during summer vacations with no tenants.
  • At the extreme, if your student tenants are noisy and disruptive, you could face penalties from your local council.

What you should do

Here are some steps you can take to minimise the risks of letting to students:

  • Only take students that have been recommended by their college. This provides a safety net, since the student's university place could be in jeopardy if they misbehave.
  • Provide tenants with a 'house pack' when they arrive, including information about local amenities and detailing their responsibilities regarding noise, recycling, care of the property etc.
  • Unless your tenant can provide references such as an employment or banking history, or previous landlord, consider asking for a guarantor to accept financial and legal responsibility for the tenant. Typically their parent.
  • Draw up an agreement including a clause stating that if one tenant leaves, it is up to the others to find a replacement. Otherwise they have to meet the total costs of the tenancy.
  • Draw up a detailed inventory of all items in the property and the state of the walls, floors etc. Make it clear that the tenants are responsible for leaving the property as they found it, or paying for repairs and redecoration.

Where to buy?

Rental levels vary wildly from one part of the UK to another, from an average low of £40.33 per week in Crewe, to an average high of £102.85 in London.

This is partly down to relative property prices across the country, but also due to the balance of supply and demand: the more students there are, and the less university accommodation there is, the higher the rent.

Rental values

Here is a sample of average rents per week from around the UK and Ireland:

London £102.85
Dublin 87.68
Cambridge 82.98
Exeter 77.54
Oxford 74.71
Edinburgh 70.26
Bristol 68.84
Durham 66.95
Plymouth 63.26
Leeds 62.03
Nottingham 61.60
Sheffield 57.12
Manchester 56.65
Birmingham 54.28
Liverpool 50.52
Hull 47.11
Wolverhampton 43.49
Crewe 40.33

With property values going through a period of volatility, it is hard to say what yields these figures represent. You should compare the figures with property values in the area where you're considering buying (or have already bought). Then ask university accommodation offices about future student numbers and what provision there will be for them.

What are students looking for?

Most students are looking for the best value and the most convenience. If you can keep your price below that of most competing landlords, you will be in demand. Students are willing to compromise on many things in order to save money.

Their priorities are:

  • Proximity to their college and to one another. There are popular student areas of every university town and city. Find out where it is.
  • Proximity to transport, shops and pubs. Students prefer to avoid suburban living and travelling too far on foot. They don't own cars.
  • Basic, clean, functional accommodation. Second hand sofas are fine, so long as they are clean. An ultra modern kitchen would make them suspicious that they were overpaying.

Overall, students are a reliable and worthwhile source of lettings income. They are a captive market, since they have a limited choice of where to live. They are generally tolerant, easygoing and undemanding tenants and there will be more of them every year.

Related links

Some information contained herein may have changed since it was first published. PrimeLocation strongly advises you to seek current legal and/or financial advise from a qualified professional.

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