The student lettings market has proven to be a popular destination for investors keen to profit from the buy-to-let opportunities available across the country. House prices in university towns have increased by an average of 22% over the past three years, with over £6 billion worth of student housing changing hands in 2016 alone. As a consequence of these impressive figures, investment into student accommodation is forecast to rise by 17% year-on-year in 2017.
The growth and popularity of the student lettings market boils down to a number of factors. For one, landlords know that there will be regular transactions coinciding with the beginning and close of the academic year, making it easier to manage lettings. Another key reason is that there is a constantly high demand from students moving seeking rented accommodation. Indeed, in 2015-16 there were approximately 2.28 million people studying at UK higher education institutions; representing a sizeable proportion of the rental population.
However, despite the strength of the market, the student lettings industry currently finds itself at a critical juncture, with a series of significant challenges facing both students hunting for rental homes and buy-to-let landlords managing their properties. In short, issues such as a lack of efficiency in the letting process and poor lines of communication between tenant and landlord have made the sector increasingly difficult to navigate for all involved.
Taking the pain and tedium out of student lettings
Given their age and relative inexperience when it comes to renting a property, it’s no surprise that students are often not aware of their rights as tenants. As such, they are often at risk of being exploited by hidden fees and malpractice, with most graduates either having experienced or heard horror stories regarding a student property. The consequence is that for too many young people the transition from home or first year halls to private accommodation can be a particularly daunting and complex experience. At the same time, students can commonly be misconceived as bad tenants, dissuading some landlords from letting their property out to this demographic. Last year, 40% of students had some or all of their deposits kept by their landlords, totalling an estimated £32 million – a concerning statistic.
For landlords, student demands today are typically for modern, clean, low-maintenance properties located in close proximity to university buildings and social hotspots. Guarantors are also a necessary part of the process, offering the liability cover and financial backing to ensure tenants will not default on rent or property damages and that landlords will not be left out of pocket. While letting agencies can manage this process, it is important landlords are also aware of the more flexible alternatives available – the rise of cost-effective and easy-to-use proptech solutions has meant that landlords now have far greater choice than the traditional decision between using an estate agent or managing the process themselves.
While the performance of the student letting market is impressive, a clear and direct line of communication between the landlord and student is vital, facilitating a constructive and transparent relationship that ensures both parties are comfortable in the living situation. From sourcing the right property or tenants through to completing the necessary paperwork, keeping guarantors in the loop and the ongoing upkeep of the property, the pain and tedium must be removed from what is currently a time-intensive and often frustrating experience.
Adopting a progressive approach
As the UK property market begins to embrace digital solutions that streamline traditional property processes, the student letting sector must also look to new technologies to ensure the market is both transparent and streamlined. This is a particularly pertinent point when considering the number of international students coming to study in the UK is forecast to rise by 6% per year over the next three years; for them, as with domestic students, it must be easier to secure a suitable place to live.
Private rental accommodation across leading university cities and towns will continue to be in strong demand over the ensuing years, and there are ample opportunities for those looking to become student landlords. Looking to the future, it will be necessary for the market to embrace new proptech trends so it can effectively satisfy the interests of both students and buy-to-let investors. More broadly, this adoption would reaffirm the UK’s position as a global destination for university students, property investment and as a progressive, technologically advanced country.
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Leon Ifayemi, CEO and co-founder, of SPCE