Why Student Accommodation Is A Great Investment

Even if you’re not a parent, purchase a property near thriving higher educational institutions anyway – your cash flow will thank you.

In the last two decades, higher educational institutions have been mushrooming all over Malaysia thanks to a booming student enrollment. As of November 2018, there are 20 public universities, 47 private universities, 34 university colleges and 10 foreign university branch campuses to choose from! In fact, according to UNESCO Institute for Statistics (July 2014), Malaysia ranked 12th on the list of top countries which attract the most international students to their universities.

Most Malaysians will already be familiar with names such as Taylor’s University in Subang Jaya, UCSI University in Cheras, and Sunway University in Bandar Sunway. Some of the newer education establishments include Xiamen University Malaysia in Sepang and Educity in Iskandar, Johor. Educity is a large education hub comprising 6 world-class universities including the University of Reading Malaysia and Newcastle University Medicine Malaysia.

Education providers are really upping their game in terms of their campus building’s architecture and design. The University College of Technology Sarawak (UCTS) is one example of an innovative masterpiece and is also the first university in Malaysia to achieve a “Platinum Index” rating under the Green Building Index (GBI).

Let’s dive into the 4 reasons why purchasing the right student accommodation is a solid move: 

#1 Student accommodation is basically inflation-proof

You have to admit that even when times are tough, the tertiary education business continues to fire on all cylinders. As long as Malaysians continue to have children, this trend will continue to persist. Regardless of how the economy is performing, most Malaysian parents these days will opt to send their kids to college and/or university.

To showcase how resistant the education industry is to economic fluctuations, consider the following instance: Despite Malaysia’s stagnant economy in 2011 at a GDP growth rate of 5.3% versus 7.5% in 2010, talks to build Xiamen University Malaysia in Sepang was held between Malaysia and China in 2011. A consensus was reached sometime after and the university construction began in 2014 – it opened its doors 2 years later.

Higher education institutions also contribute to the significant (surrounding) area development.  A great example is University Tunku Abdul Rahman (UTAR) in Kampar, Perak. Prior to the university being built, Kampar was a quiet, old mining town. The town’s landscape has drastically transformed since, with a new section called New Town being built. Today, it features numerous commercial establishments such as popular F&B chains, retail shops, cafes, gymnasiums and a cinema.©kampartown.com

#2 The right product in the correct location will have strong tenant demand

Investors are also becoming increasingly interested in student accommodation as an investment as good (student) rental properties in an ideal location is able to yield strong rental returns. 

Meanwhile, a recent 2018 study conducted by UK credit report company, Totally Money UK, revealed that university towns like Liverpool and Middlesbrough offer rental yields up to 7 times higher than London’s city centre.

In pinpointing the right investment product, investors will want to ensure the following boxes are ticked:

• It is easily accessible, preferably with connecting public transportation such as buses, LRT and MRT

• Availability of amenities including convenience stores, restaurants and retail shops

• Low crime rate area

Both safety and comfort rank highly on a parent’s checklist. Due diligence is especially important here, investors should scout out the neighbourhood beforehand instead of depending on past trends.

For example, many of the students who were enrolled in the universities and colleges within Bandar Sunway preferred to rent a unit within a neighbouring residential area as the housing there was very affordable. However, in recent years, an influx of foreigners and unsavoury foreign students residing in one of the apartment complexes there has rendered the area unsafe for students to live in. This once student-friendly neighbourhood is now filled with brothels, sleazy bars and massage parlours and thus is no longer a consideration among student tenants. 

#3 Savvy parents will realise that Buying > Renting

Should parents do the maths themselves, they will clearly see why buying trumps renting. Taking Bandar Sunway as an example, student accommodations located nearby universities such as Sunway University and Taylor’s Lakeside University average at RM1,000 per room. A real-life example: My colleague’s parents are forking out RM1,300 per month for her younger sister’s room at U Residence in Taylor’s.

Her parents are willing to pay such a substantial sum each month as they would not want to compromise on the convenience and safety of their child. I don’t blame them – they will have a peace of mind knowing that their child goes to sleep each night in a safe and sound environment.

Putting things into perspective however and considering the girl’s 3-year course, that sum equals to (RM1,300 X 12 X 3) RM46,800 total in rental payments, over a span of 36 months. This sum is equivalent to the 10% downpayment for a RM468,000 property! Now if my colleague’s parents had invested in a property within the price range above instead, they would now be the proud owners of an appreciating asset.

#4 It is definitely a great long-term plan

Using the example above, imagine if you had purchased a unit instead of renting, your children would be the co-property owners throughout their stay there. This helps instil a sense of responsibility within them as they would have to take on minor obligations such as paying the utility bill each month as well as property maintenance and upkeep.

Let’s not forget, that your child will only need one room, therefore the remaining room(s) could be rented out to your child’s friend, thus offsetting your costs for the home even further. If you are savvy enough, you will be able to cover the monthly instalment payments and service charges through the roommates’ rental rates. 

Best of all, your child will have a place to continue living in once they graduate and start working. They could then take over the monthly instalments from you once they are more financially capable. Essentially, it is a form of the rent-to-own scheme, where the parents will be locking in a great property deal at the current market value, and where the child can also enjoy living in the home and they have the option of purchasing from their parents in the future.

Should your child decide to live somewhere else instead, you could easily rent out the unit to the next incoming batch of students or sell it off and recoup your investment. Either way, it is a win-win situation.

Source: iProperty