For the first time since 2007, interest rates are set to rise in the United Kingdom. This is something which an investor has not had to worry about in a while. However, they are going to have to start. A rise in interest rates is going to have an impact on your mortgage and the amount of yield you get from the properties you own.
Recently, the Bank of England posted a Financial Stability report which stated that investors should be concerned about the rise of interest rates when it comes to operating in the buy-to-let market. However, it is believed that those who own student property should not be all that concerned. Let’s take a little look at these reasons.
Student property is stable
Owning a student property is pretty much recession-proof. Even when the economy is going through a bit of a downturn, students are still going to need somewhere to stay. In fact, this is one of only a few investments which saw an increase in annual returns during the recession.
Yes, there will be a small impact from the change in exchange rate. However, this impact is going to be marginal at best. Most investors will not even notice a difference in their income. In fact, many of them will not experience a change at all.
Student property demand will not change
If you operate outside of the student market, your income is at the whim of how much people are willing to pay for rental property. If the rent is too high, many people will opt for other ways in which to find somewhere to live. This is a problem which many investors faced during the economic downturn. You are not going to get that in the student market.
People, not just from the United Kingdom, will continue to apply for educational places. Many of these students, particularly those from overseas, are willing to pay a premium for somewhere to live. The amount of people applying to university has risen sharply over the past few years too. An investor who operates student property is unlikely to have difficulty in filling up their rooms.
Student property is cheaper
Did you know that the vast majority of student property is actually purchased with cash? This is because student property investment tends to be far cheaper than your standard buy-to-let for a whole host of different reasons. This means fewer investors are actually going to need to borrow money to purchase their property. This will, in turn, lead to fewer mortgages. Those who do not have a mortgage on their property are not going to care all that much about rising interest rates. It is not going to matter all that much when it comes to their bottom line.
In short, despite the fear about interest rates rising, those operating in the student property arena should not have all that much difficulty in ensuring that their income is stable.