This September, student accommodation is set to become more competitive than ever as universities are looking to prioritise campus-based learning again for the first time since March 2020. 

Student HMOs in particular are expected to see a record year. Across the UK, student properties make up the majority of the HMO market, making it an incredibly well-established investment strategy. 

My very first HMO deal was a student HMO, and I’ve been investing in these kinds of properties for more than a decade now. One of the top reasons I absolutely love investing in student HMOs is because it’s a pretty safe bet that universities aren’t going anywhere! 

In this blog post, we’re going to cover the numbers behind student accommodation, what the rise in purpose-built student accommodation (PBSA) means for the student HMO market, and the opportunities this brings for HMO investors, including those interested in a rent to rent.

The Numbers Behind Student Accommodation

Each academic year, more and more students are taking up university places in the UK. And as living away from home is a big part of the university experience, further growth is expected in the student lettings market.

Research conducted by UCAS and assessed by UniHomes showed that university applications from 18-year-olds have hit their highest level in nearly a decade. There was a 4% increase since 2021, and it was an astounding 14% rise compared to 2020.

Naturally, the COVID-19 pandemic led to a hesitancy in university applications, and now that student life is returning to normal, more people are applying for their undergraduate education. And this rise in applications means there’s an increased need for student accommodation.

Student HMOs vs PBSA

There’s a growing demand for HMOs among students, despite the rise in PBSA. Tens of thousands of PBSA bed spaces have come to market in recent years, and many more are still to come. 

Despite this, the future of the HMO market looks as strong as ever. HMOs and PBSA units are both essential, and understanding the role each type of accommodation plays is important. Personally, I don’t think PBSA is a material risk to the student HMO market. I believe it actually provides an opportunity for HMO investors! 

This is a complicated topic with many moving parts but an important one for all HMO investors. We’ll start by talking about what the increasing standards and management service mean across the industry and then touch on the opportunities this brings.

Increasing Standards and Management Service

The PBSA sector will continue to force standards, in addition to rents, upwards in the student lettings market. Student HMO investors will have no choice but to improve their accommodation and service. However, some will get left behind in the industry.

At the same time, old, tired PBSA stock will continue to change hands and compete amongst themselves. I don’t believe they will ever crack the nut of retaining students after their first year, which would mean their market share will never increase significantly.

New PBSA buyers will continue to make incredible schemes, but last year’s PBSA stock will no longer be the first choice. Gradually the new stuff will drop down the list of favourability, and eventually, become the old stuff. This micro cycle will continue to repeat itself.

Staying Ahead of the Competition

HMO investors don’t need to be fearful of these increasing standards. Just focus on creating a high-quality product! Start by researching ways you can stay ahead of the curve and look at how you can provide a superior management service. 

As competition is increasing quickly, students are wanting more out of their properties. With my student HMOs, I want prospective tenants to look at photos of the property online and be sold before they even step foot into the home. 

Staying ahead of the competition and providing a top-notch tenant and property management service will allow your property to be even more appealing to prospective tenants, and this may lead to your tenants wanting to stay in your property for longer.

At times, you may need to rethink your HMO properties to provide tenants with the properties they’re looking for. You need to be open to making changes and adapting your products to tenants’ changing priorities. 

Growing Opportunities for Rent to Rent

Landlords with properties in the wrong places, low specifications, and poor customer service, sales, and marketing skills will find their properties increasingly don’t let! This will provide an opportunity for rent-to-rent (R2R) providers and even professional HMO landlords because fundamentally, most of these properties will have the potential to remain good HMOs.

Being able to genuinely add rental value is absolutely critical to the R2R model in particular. It won’t work if you can’t do this as you’d then have to rely on landlords agreeing to rent below market level, which just isn’t a scalable model.

If you find creative and cost-effective ways of adding rental value, you can make a real success of the rent-to-rent HMO strategy. And more of these kinds of opportunities will likely come forward in the coming years!

If you have questions about the student HMO market or rent-to-rent model, head over to The HMO Community Facebook Group. And for more helpful insights on how to start, scale, and systemise your HMO business, join The HMO Roadmap today!

About the Author:

Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!