Your guide to student accommodation investment

The student housing market is heating up in german university towns, with investors racing to finance new purpose-built developments. If you’re interested in a high-yield student accommodation investment, here are a few considerations.

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Tap into a growing demand 

Underinvestment in on-campus housing combined with large incoming classes of students has led to a high demand in many markets for purpose-built student housing. A student accommodation investment provides predictable residential income, due to high demand and the regularity of school terms. It also provides a fairly recession-proof investment vehicle in comparison to other real estate sectors, as universities have been known to see a spike in applications during economic downtime. There’s a wide range of financing options, with institutional investors including life insurance companies as well as pension funds getting involved.

Understand different housing options 

One of the first things to understand when considering a student housing investment is the difference between purpose-built student housing (PBSH) and traditional apartments. The leasing model varies, with PBSH leased by the bed rather than the unit. A student is only responsible for their share of the rent, with individual contracts typically drawn up for each roommate. Leases also tend to be shorter, based on a 50-week time frame to allow a free period for turnover between school terms. A PBSH apartment will typically have multiple studio-style en suite bedrooms, with a shared kitchen and living area. Yet these aren’t your ordinary dormitories. Many developments offer luxurious amenities in their common spaces like cinemas, free bikes, state-of-the-art gyms, 24-hour concierge services and group study areas. 

Compare german markets 

Investments in student residences are a Germany-wide trend. The greatest potential for investors is offered by cities in which the demand exceeds the supply of student real estate. Among the German cities with the highest demand are Düsseldorf, Dortmund, Hanover, Bielefeld and Duisburg. 

Ulm and Stuttgart also belong to this category and achieve the highest prices per square meter. In the Bavarian state capital Munich, on the other hand, there is a tendency to oversupply in student housing. Nevertheless, the highest prices for properties are still being charged in Munich: here, the square metre in a single apartment now costs over 22 euros. Individual properties with exclusive furnishings in prime locations even reach prices of over 40 euros per square metre. Whether the investment is worthwhile, however, cannot be judged in general terms on the basis of demand or supply. As before, every investment requires intensive market research, which forms the basis for decision-making. As an expert for local and international real estate markets, Engel & Völkers is at your side with advice and assistance.

Make a wise investment 

Student housing has transitioned from the niche undertaking of private investors to become a mainstream asset. It offers a secure stream of income as part of an investment fund, with higher yields than many other sectors particularly in popular university cities from Berlin to Munich. Yet at the same time it’s important to realise that no investment is fool-proof. Individual landlords should always look at the local regulations to understand tenant rights and property management, particularly when investing abroad. Therefore Engel & Völkers as an expert would like to advise you. Location is also important to consider; ideally, your housing unit should be within a half-mile radius of the campus. Students look for units in turnkey condition, suitable for their studying and privacy needs. Finally, be aware that units may sit vacant during the summer holiday period.

If you’re considering a student housing investment, you’ll be in good company as the demand for custom-built developments continues to grow. You can also browse the latest market trends to suss out the best locations for niche investments.

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