Monday 15 July 2024

Will Investors Turn To Student Accommodation To Avoid Paying Higher Stamp Duty Taxes?

April’s 3% levy on buy-to-let and second homes could drive investors towards the student accommodation market

Over the last few years, the UK’s student accommodation market has become a popular asset class for property investors.

As investment in the sector doubled, 2015 emerged as another record-breaking year for the market.

A new report from the property experts at CBRE has shown that the UK’s student accommodation sector received £5 billion worth of investment in 2015.

Good news for investors, the report also revealed that the average price of renting a student room increased by 1.94% nationwide.

What’s more, CBRE revealed that investors achieved an average 18.4% return over a 12-month period – when factoring in yield shift and general property market trends.

The rise of the student accommodation market

The demand for new-build student accommodation in the United Kingdom has been driven, in part, by the rising number of students who wish to attend courses in the country.

The amount of overseas students – who are the main target market for high specification, purpose-built developments – has increased steadily over the past few years. HESA data shows that the amount of overseas students studying in the UK increased by 7% (390,000) at the end of the 2014/2015 cycle.

The prestigious reputation of higher education establishments in the UK, increasing global mobility and the government’s lift on the cap on the amount of overseas student numbers, have all contributed to the ongoing success of the UK’s student accommodation investment market.

Experience Invest, a leading real estate specialist and student property developer has been at the forefront of the market.

Experts at the firm believe that investors may look to lower entry level options like student accommodation, in light of the government’s 3% levy, which will be added to buy-to-let properties and second homes from April 2016.

It is not yet clear whether an increased stamp duty rate will apply to student property.

The company suggest that investors could generate higher returns from the student market than the residential market in the mid-to long-term.