Is Investing in Student Accommodation a Good Idea? Exploring the Higher Education Market

Student accommodation and/or housing remains a popular option for property investors and portfolio landlords. In fact, our Q1 2024 report revealed that student accommodation ranks towards the top of real estate options in terms of desirability, with only BTL assets proving more tempting.

But, in the current market, is investing in student accommodation a good idea? Also, what options are actually available to property investors?

This blog will answer these questions and more. While the success of any investment will depend on the underlying investor’s circumstances, there are a few key details that everyone should factor in and take onboard.

Defining Student Accommodation and How to Invest in Student Housing

Generally, there are two main types of student accommodation landlords can invest into: houses in multiple occupation (HMOs) or purpose-built accommodation[1].

Large properties are typically used for HMOs, where they may be tweaked to turn former reception or office rooms into bedrooms. In HMOs, students share bathroom and kitchen facilities. This is considered the “traditional” house share for those in higher education.

Purpose-built student accommodation (PBSA) can include properties with en-suite rooms, self-contained “pods”, or individual flats. They’re often found in city-centres and may have certain amenities while being close to the university in question.

There may also be options outside of these obvious choices however. Commercial properties, especially office blocks, can be converted into new flats specifically targeted at a local student population. Also, bargains may be found at an auction, where the properties on offer may just need some cosmetic changes to attract new tenants.

In terms of the best places, when looking at where to invest in student housing, there are several options open to investors. Liverpool is home to multiple universities and offers yields as high as 9–12% in the right areas, where demand can be driven by students[2].

In terms of popularity with the students themselves, the University of St Andrews takes the top spot for student satisfaction according to the Complete University Guide’s league tables[3]. Meanwhile, University College London is the largest university in the UK by enrolment[4] (behind The Open University). Evidently, there are multiple routes for targeting the student housing market.

While there are plenty of options available, this doesn’t answer the question of is investing in student accommodation a good idea. For this, we need to look at demand.

Is Investing in Student Accommodation a Good Idea in the Current Market and Beyond?

Despite any potential drawbacks, young people are still drawn to higher education. Nearly 330,000 UK 18-year-olds applied to university or college in the most recent academic year, according to UCAS[5]. This was an increase of 2.2% from 2024, and is a record high. Demand from students is unlikely to slow down either. UCAS expects that higher education applications could rise by as much as 31% by 2030, in comparison to 2022[6].

As more students flock to university, they’ll need somewhere to live. Looking at current trends, we’re not on track for meeting the demand.

Nationally, the demand for student accommodation stands at 1,489,110 students, according to Cushman & Wakefield[7]. Some 96% of students seek housing during their academic journey across 74 different locations in the UK and yet despite this demand, the net increase in beds for the 2023/24 academic year was just 8,760.

Similar results can be found elsewhere. Analysis of the latest student accommodation statistics showed that there’s going to be 2.2 million students needing accommodation by 2026[8] – a rise of nearly 39% since 2021. But, we could actually end up facing a shortage of 621,373 beds in 2026, the result of a lack of both PBSA and HMO options.

There is no getting away from the fact there is a clear need for more student housing in the UK. But this isn’t the only factor that needs to be considered. Investors need have an incentive to act. Fortunately, the student housing market offers potential for expanding landlords.

Be Mindful of What’s Going On in the Economy and News

Student accommodation investment yields and returns can be relatively high. The CBRE’s 2024 PBSA Index[9] reported total returns of 9.8% in the year to September 2024. Moreover, HMO gross yields in certain university towns can be as high as 15.5%[10]. Comparatively, the average rental yield across the English and Welsh BTL market sat at 7.5% in Q1 2025[11].

Although, while the student market offers plenty of potential, there are a few potential drawbacks investors need to be aware of. Logistically, finding tenants will likely be relatively easy, but investors may need to look for new ones every year or two. Additionally, properties may end up unoccupied in the summer months as students go on holiday or return home. This could cut rental income, at least for a few months.

Additionally, student HMOs will be subject to stricter regulation than ordinary buy-to-let properties. For example, fire doors will need to be installed and maintenance costs are also likely to be high. Local councils may ask for specific licences.

The tenants themselves could also prove costly. Investors may end up with tee-total renters who do nothing but study and are asleep by 9pm. But, there’s a strong chance they’ll also be opening up their properties to party animals who have zero chance of getting their deposits back! Student landlords may want to set money aside for repairs and refurbs.

Economic challenges may also have an impact. Many universities are facing a funding crisis[12], even with a tuition increase in play[13]. Legislative changes[14] are also negatively impacting how many international students come to the UK[15].

Is It Worth It?

So, is investing in student accommodation a good idea? Why invest in student accommodation at all if there are so many risks? Well, as with any investment, the answer is: the success will depend on individual circumstances, and investors should seek advice.

Generally though, diversity is key, and student accommodation could easily sit alongside a commercial unit, residential asset, and a mixed-use property, if it’s right for the investor. At Market Financial Solutions, we have funding available for all these property types and more. If property investors want to target a new and potentially lucrative market, we may be able to help.