Our last article highlighted the looming pension shortfall problem and the dilemma of how to build an alternative portfolio that is not subject to the vagaries of the stock market. The number of students attending university outside their own country is forecast to more than double by 2025.
Education is an increasingly global marketplace. Students are becoming more willing to travel abroad for the best educational opportunities, and the UK is very well placed to continue to take advantage of this. The long-term trend for global mobility is not going to be hampered by short-term economic turbulence and recognising the increasingly global nature of the knowledge economy is an investment opportunity for student accommodation providers.
Total returns for investors in September 2011 were highest in London, reversing the previous year’s trend and returning to the longer-term status quo where the returns in the capital outperform those in the rest of the UK. Student property returns averaged 11.5 per cent in September 2011. This is a slight easing from 13.5 per cent achieved in the previous year, but these returns continue to lead the market among commercial asset classes. The index shows that total returns for student property in London have nearly doubled. Returns in the capital climbed to 15.1 per cent in 2011, up from 8.4 per cent in the previous year.
The growth in the capital has been fuelled by the particularly robust performance of the core market, and more specifically, accommodation with rents of less than £220 (US$350) a week. This is also the rent bracket where rooms were filled most quickly, signalling a strong depth of demand. It is also worth noting that studio flats in London were effectively fully let. This was not the case in 2010, again underlining the demand for student accommodation in London.
There is a clear supply and demand imbalance in that there is quite simply not enough quality accommodation available for the growing number of overseas students heading to the UK to study. This presents clear opportunities for individual investors seeking a passive income stream via participation in the sector.
About the Author:
Jerry Dingley and Tim Whiteley have a combined 50 years of experience as IFA’s advising expatriates & international investors both Onshore UK and Offshore Asia. Specialist areas include wealth protection services, offshore trusts, QROPS UK pension transfers, and creating tailor made investment solutions for individuals around the world. They can be contacted for more information at firstname.lastname@example.org