The Pros and Cons of Student Property Investment in London (2024)

Historically, London property investment has been considered one of the UK’s most popular investment options. More recently, however, more people have been turning their attention away from London investments and are instead seeking out buy to let opportunities in thriving Northern cities.

So what about student property investment in London? Student buy to let investment is one of the country’s most popular and profitable investment methods, but in London, student property investment comes with both upsides and downsides. Here are some of the pros and cons of making a London investment in student property.

London Generates High Student Demand

Boasting around 40 higher education institutions and a student population of over 400,000, there’s no denying that London generates a lot of student demand. Thousands of new students head to the capital year after year to embark on their first year of studies, resulting in a need for high-quality student accommodation.

Much like other UK student cities like Liverpool or Manchester, a large proportion of London students are from overseas countries. In 2015/16, a total of 107,200 international students were recorded within the capital, making up 29% of the London student population. Driven by this demand, many property developers have started introducing impressive new student properties to the London market, focusing on better locations and more luxury designs and amenities. With today’s students causing a recent shift towards a higher standard of living, these types of properties are likely to attract plenty of interest from London students both now and in many years to come.

Student Property is Cheaper than Residential

London property is notoriously expensive, and for a lot of investors, making a buy to let purchase in the capital is out of reach in relation to their budget. While this is true for any London property that you purchase, certain property types tend to be a lot more affordable than others. When making a London investment, student property is often cheaper due to the fact that student accommodation options are usually built in smaller properties like studios or one-bedroom flats.

‘Student pods’ in particular are some of the most affordable London investment options, with prices starting at around £90,000. These properties have a layout that’s similar to a studio apartment, with the bed, kitchen, and living room all located within the same space. Other student properties in London can be pricier, especially if they’re in a more premium location and feature a more impressive design.

Low Rental Yields

One of the reasons why a lot of people are turned away from the London property market is down to the low rental yields that the capital is known to create. London generates average rental yields of around 3.7%, which is a disappointing figure when compared to yields in Northern cities like Liverpool or Manchester, which boast average rental yields of 5 to 5.55%. When it comes to student property, London investment opportunities aren’t likely to bring investors the kind of attractive returns they may like.

One example of a student investment opportunity with high yields is Liverpool’s completed and tenanted City Point development. This property is based in a prime Liverpool location which is close to the city’s university campuses and comes with 8% rental yields. The fact that this property is priced at just £59,995 also shows that for the same price as purchasing one property in London, you could buy multiple student properties in the North West, while benefitting from double the rental returns.

Disappointing Capital Growth

Along with rental yields, another of the most important qualities that an investment property should have is a positive rate of growth. Unfortunately for those who are keen to get started with student property investment in London, capital growth for London investments is slow and often non-existent. A recent report from the Office of National Statistics revealed that prices in London had dropped by 2.9% from June 2018 to June 2019.

This is one of the reasons why when buying a student property, London investment is often overlooked by those who want to profit from capital growth returns, especially when more high-performing cities like Liverpool are showing property price growth rates of 7.5%. Predictions for the future also reveal that the North West region, home to Liverpool and Manchester, is expecting property growth of around 18.1 % by 2022, while at the same time, London house prices are predicted to rise by just 4.5%. Leeds property prices are also predicted to grow significantly over time. It’s safe to say that if capital appreciation is at the forefront of your investment strategy, it’s worth looking to cities like Liverpool, Manchester, and Leeds for student investment.

It’s clear that if you’re interested in buying a student investment property, London definitely comes with different benefits and disadvantages. Whether or not you go ahead with a student investment in the capital essentially boils down to your own goals, preferences, and budget.

If you have a lower budget and want to make some big returns through both capital growth and rental income, looking up North may be your best bet. On the other hand, if you’re keen to get involved with an investment in one of the world’s most populated student cities, purchasing a student investment property in London is something to think about.

Before you go ahead with your first student property venture, get in touch with the team at RWinvest. We can guide you through our current UK student investment opportunities in Liverpool, paying attention to your specific goals and helping you find the perfect property. Contact us today for a helpful chat with one of our dedicated sales professionals!