UK property continues to show its resilience – with one sector attracting huge investor attention
Real estate is undoubtedly one of the global investor community’s most popular safe-haven assets.
In times of political and economic uncertainty, the security of bricks and mortar can help to diversify portfolios and protect wealth.
And despite the landmark vote for Brexit and the recent hung parliament result at the general election, investment in British real estate continues to surge among domestic and international-based buyers.
The strength and resilience of UK property
While equities and financial markets fluctuated following both the 2016 EU referendum and 2017 general election, UK real estate performance was resistant to any perceived uncertainty.
Britain is deep in the midst of a housing shortage. An additional 300,000 new houses are needed each year just to keep pace with demand from the country’s rising population.
Quite simply, this undersupply has not changed as a result of either Brexit or the general election.
Land Registry data shows that average property prices rose by over 3% in the 10 months following the Brexit vote, while average UK rents are forecast to grow 17.6% by 2021.
And the appetite for investment has continued to rise, too. Indeed, Savills has found that one property sector in particular has attracted over £2.1 billion worth of investment in the second half of 2016 following the EU referendum, compared with £1.9 billion in the first half of the year.
UK student property – the £45 billion opportunity
The UK is renowned for the quality of its universities around the world – and the status and prestige of a British education remains undiminished in light of recent political events in the UK.
2.28 million students, including 438,015 from overseas, studied at UK higher education institutions in 2015/16. With 16 institutions ranked inside the top 100 universities in the world, students from around the world are prepared to pay a premium to study in the UK.
Yet the standard of traditional university accommodation is widely viewed as largely inadequate or of poor quality.
It’s this outdated supply, combined with the rising demand for purpose-built student accommodation amongst today’s students, that’s made student property the UK’s highest-performing asset class.
The sector has already grown by 37% since 2014, and Knight Frank believes the UK’s purpose-built student property market will reach a total value of £45.8bn by September 2017.
But crucially for investors, such is the continued undersupply of quality accommodation in the UK, student property generates 50% higher yields than residential property units. Average rents in the sector are also expected to rise by a further 2.5% in 2017.
While stocks and bonds markets remain vulnerable post-Brexit and post-general election, property in the UK is expected to continue to show the strength and robustness its demonstrated over the past two years.
It remains the preferred safe-haven investment for many buyers, both at home and abroad. And as the sector’s best performing asset, student property is likely to gain further investor attention, as increased student numbers put further pressure on already low levels of student accommodation supply.
Select Property Group is the developer behind Vita Student, the UK’s leading purpose-student property investment brand. With nationwide locations and a proven track record of 100% occupancies and high-rebooking rates, Vita Student has delivered almost 2,000 beds to date, generating £39.1 million in rental income for investors in just four years.