August 29, 2023

Investing in UK Property: Serviced Accommodation vs. Student Accommodation

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Ollie Whitehouse, Streo Founder & CEO

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The United Kingdom has always been a hotspot for property investment, largely due to its stable economy, strong demand for housing, and significant student population. However, with various sectors to consider, investors are often left pondering between options like serviced accommodation and student accommodation. Both avenues offer their unique sets of rewards and challenges. In this UK-focused blog post, we will delve into the specifics, offering statistics and insights tailored to the British property market.

What?

Introduction to Serviced Accommodation

Serviced accommodations in the UK are similar to hotels but offer a more homely experience, making them ideal for tourists, business travellers, and families.

Investment Metrics

  • Average Yield: Yields can range between 6-10%, depending on location and quality of service (1).
  • Occupancy Rates: 70-80% on average, but this can vary widely depending on location and time of year (2).
  • Initial Investment: Higher upfront costs due to the need for furnishings, amenities, and often higher-quality finishes.
  • Operating Costs: Ongoing costs for housekeeping, utilities, and maintenance.

Introduction to Student Accommodation

With cities like London, Oxford, and Cambridge being home to prestigious universities, the UK’s student accommodation market is robust.

Investment Metrics

  • Average Yield: Generally ranges between 4-7% (3).
  • Occupancy Rates: High, often near 100% during the academic term (4).
  • Initial Investment: Usually lower upfront costs due to basic amenities.
  • Operating Costs: Lower operational expenses but less scope for premium pricing.
Differences

Key Differences for UK Property Investors

1. Target Audience

Serviced Accommodation

Broad appeal, from tourists to business travellers.

Student Accommodation

Primarily students, making the market cyclical and dependent on academic calendars.

2. Income Stability

Serviced Accommodation

Potentially volatile due to varying demand throughout the seasons.

Student Accommodation

More stable, especially if agreements align with the academic year.

3. Regulations and Licences

Serviced Accommodation

Subject to stricter UK regulations, including planning permissions and safety standards (5).

Student Accommodation

May require accreditation from universities and adherence to HMO (House in Multiple Occupation) regulations, such as Article 4.

4. ROI Potential

Serviced Accommodation

Higher potential ROI, albeit with increased risks.

Student Accommodation

Stable but lower ROI, often considered a 'safer' investment.

5. Exit Strategy

Serviced Accommodation

Broad buyer market, easier to sell.

Student Accommodation

Specialised investment, fewer potential buyers.

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Resources

  1. “2022 Global Real Estate Report,” Jones Lang LaSalle (JLL), 2022. (URL)
  2. “Serviced Apartment Industry Report,” Savills, 2021. (URL)
  3. “Student Housing Investment Report,” CBRE, 2022. (URL)
  4. “2022 Student Accommodation Report,” Knight Frank, 2022. (URL)
  5. “Regulatory Framework for Serviced Apartments,” Local Government Association, 2021. (URL)
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