Over the past few years, the return of the United Kingdom as a leading destination for real estate investment has been led by its student housing sector.  Investors in this sector have benefited from the ongoing transition from traditional university-owned accommodation to the purpose-built accommodation which appeals to the country’s growing influx of international students who tend to be both more demanding in choosing accommodation and more affluent than UK students.  Investors in this market have historically tended to focus on undergraduate buy-to-let accommodation, however a lucrative new market in high-quality postgraduate accommodation is just starting to materialise.

In 2011/12, postgraduates made up 33% of all higher education students, which was an increase in proportion of almost 10% on the previous year.  There are currently 600,000 postgraduate students studying in the UK and 300,000of these are full-time.  Proportionally, postgraduates are also far more likely to be from overseas than undergraduates.  For example at Oxford, 63% of postgraduate students are from overseas compared to just 14% of undergraduates.

Both British and foreign postgraduates tend to be more independent and focused on study than undergraduates and are therefore less concerned about having vast common facilities(which reduce revenue for the investor) in their accommodation and more willing to pay a premium for additional private space.  However due to its strong growth, this market is heavily undersupplied. To cater for the excess demand some developers are beginning to construct new postgraduate-only accommodation.Glasgow, Leicester, Southampton, Liverpool and York have all been identified by industry professionals as investment hotspots.

Generally, student accommodation is renowned for being a counter-cyclical investment product (more people go to university when the job market tightens) and nowhere is this more the case than in the postgraduate sector.  For many graduates, job opportunities, or lack of, can be the key factor behind their decision on whether to study a postgraduate course. With more employers than ever now demanding postgraduate qualifications, demand for these courses has never been stronger.

Already, postgraduate student accommodation looks set to generate 50% greater yields than most normal buy-to-let properties.  To take one leading destination as an example, at Leicester, where 25% of the 38,000 students studying at the city’s two universities are postgraduates, yields on postgraduate accommodation have now reached 8%.

We advise you to keep checking Which Investments for more updates on one of the coming year’s most exciting investment opportunities.