Student Housing Investment Opportunities: Where to Look Before the Next Academic Year

With the next academic year looming, it once again raises the question of where are student housing investment opportunities in the UK? For some however, a more pertinent question may be is there even a student housing market worth pursuing?

The higher education world is struggling at the moment. Political changes have hampered demand, and many universities are struggling financially[1].

But, there is still a clear need for student housing in the UK. Demand for student housing, along with high-quality office space, is fuelling a commercial property revival, according to recent research[2].

In fact, Knight Frank[3] found that £744m was invested in the UK PBSA market in Q1 2025, and CBRE’s[4] forecasting strong growth for the sector over the next year. What’s more, student housing is being touted as among the safest property investments for consistent rental yields[5].

For those willing to seek out student housing investment opportunities within the wider BTL sector, there are a few locations which could be explored first.

Key University Towns

The success of any property investment will depend on individual circumstances but by embracing a targeted approach, investors could increase their chances of securing a winner.

To start with, property investors can look for student housing investment opportunities via a city’s popularity with students themselves. Uni compare[6] recently analysed UK university cities on a range of factors including cost of living, safety, university quality, and public transport. These factors were then combined to create a “Student City Score” to find which cities provide the best overall experience.

Taking the top spot was Newcastle upon Tyne, which has a student population size of nearly 50,000[7]. Other high ranking English cities included Cambridge, Leeds, and Manchester. The latter may hold a particularly high amount of potential for student housing investment opportunities. Manchester has been named as the highest BTL yielding city in the UK, with the average rental yield sitting at 6.35%, according to Cohab[8].

In terms of specific universities, Birmingham Newman University, the University of St Andrews, and Bishop Grosseteste University rank highest for overall student satisfaction[9]. Volume wise, Savills[10] details that London boasts the highest graduate retention rate, at 59%, with a total of 158,000 graduates entering its employment market annually. Meanwhile, Manchester and Birmingham have retention rates of 49% and 41% respectively, with 31,000 and 25,000 new graduates entering these markets each year.

Also, when it comes to asset type, HMOs are a clear stand out in this market. They are often thought of as a prime student housing option for both students and landlords alike. Moreover, they are a crucial element of the UKs overall rental housing stock.

The HMO market in England and Wales is valued at £78bn according to COHO[11], and it generates £6.3bn in rental income every year. London, once again, has the largest proportion of HMOs, accounting for a third of the UK’s stock, followed by the South East (13.6%), South West (10.7%), North West (8.4%), and Yorkshire & Humber (7.4%).

Challenges Are Mounting

There are plenty of student housing investment opportunities in the UK, but it’s clear that the market isn’t performing as strongly as it could be — or as it has in the past[12]. The higher education sector simply isn’t in a stable financial position at the moment.

While a multifaceted issue, political changes and rising costs have diminished the appeal of studying in the UK for international students[13]. With foreign enrolment declining, many universities are feeling the pinch. Tuition fees for UK students will be up to £9,535 for courses starting in 2025 to 2026[14].

Tuition fees for British students have been capped around the £9,000 mark for several years now, but there is no cap for international students. Typically, international undergraduate fees will vary between £11,400 and £38,000[15].

As international student numbers drop, our universities’ bottom lines are hit. The total income of UK higher education providers in 2022/23 was about £50bn. Of this, some 52% came from tuition fees – 43% of which were paid by international students[16].

The Office for Students (OfS), the higher education regulator, has warned that 40% of England’s universities are expected to run budget deficits this year. Looking ahead, many universities have a “material risk of closure” unless they take dramatic cost cutting measures over the next few years. Without universities, there will no need for student housing.

But There Are Upsides

Still, student housing investment opportunities hold an (arguably) underappreciated advantage over other BTL assets in the current market. The Renters’ Rights Bill aims to abolish fixed-term assured shorthold tenancies (ASTs), which would make all tenancies periodic going forward[17]. For some landlords, this could reduce certainty and their ability to plan ahead. It may also lead to longer void periods, and limited control.

But, currently, new Purpose-Built Student Accommodation (PBSA) tenancies are set to be exempt from this, so long as they comply with the latest proposals[18]. Moreover, Ground 4A – a new ground drafted within the bill – will allow landlords to regain possession of HMO properties let to students between 1 June and 30 September each year[19]. This will allow HMO landlords (so long as they provide written notice[20]) to target new student tenants every academic year.

Ultimately, the UK still needs more student housing options. According to analysis put forward by CBRE[21] last year, we are on track to have a shortfall of 620,000 student beds by 2029[22]. Where landlords find student housing investment opportunities, even in the face of all our current challenges, Market Financial Solutions will be there with tailored HMO and BTL funding.