Purpose Built Student Accommodation or PBSA is it worth it?
- Smarter Property Investing
- Mar 20
- 2 min read
Purpose-Built Student Accommodation (PBSA): As the number of university students continues to rise, PBSA has become a popular investment option. However, it can be subject to stricter regulations and intense competition. Numerous developers have entered this market, and have, and continue to pump millions of pounds, into building new blocks and repurposing old properties into amazing new spaces, which has then seen saturation and sometimes leads to PBSA being viewed as a depreciating asset, especially as newer developments can diminish the value of older ones.
So what is PBSA or purpose-built student accommodation? It is exactly what it says on the tin! Accommodation built by a developer, ideally close to a university or town or city centre, specifically for students to live in. PBSA normally provides everything a student would need in terms of utilities and facilities, such as study rooms, laundry rooms, kitchens, lounges and games rooms. PBSA configuration can be separate studio apartments with a bedroom/lounge/study/kitchenette, and a bathroom, or sometimes you will find cluster flats where 5-8 students will share a kitchen.
PBSA will normally provide all-inclusive bills to the students for their electricity, water & WiFi, with the management generally looked after by a specific student lettings company, with experience of dealing with students, having strong ties to the local university.
PBSA is a good way to alleviate pressure on the private rental sector, freeing up more residential property for private non-student tenants in a local area. This is good when there is a housing shortage in a particular area with high demand. For the students themselves, PBSA provides a great way for, first-year students in particular, to meet new friends, and building a sense of community, arguably helping to improve course pass rates.
This is all great for the local community and the students themselves, but is PBSA a good investment option? PBSA has ranked in many polls as one of the highest-ranked favourite investment strategies for property investors, with temptingly high rates of returns. Many PBSA developments have even offered guaranteed or assured rental yields for fixed periods, tempting investors even more. Who wouldn’t want 10% fixed for 3 years, with nothing to do but receive the money. We could leave it there however PBSA, like any investment is still prone to risks, so lets list the pros and cons to investing in PBSA:
Pros
No Stamp Duty
Low entry to investment point
Hands-free, fully managed investment
Close to universities/city centres
Quality facilities
Higher yields
High demand
Cons
No finance available, cash only to purchase
Very low capital growth
Lack of diverse exit strategies available
Prone to saturation
Hopefully, this guide has given you enough information to help you decide whether purpose-built student accommodation is worthwhile considering as an investment option or strategy to add to your portfolio. Certainly, there are many who like the hands-free ease of purchasing a property, with a low cash entry, and high returns, however, the low capital appreciation over the long term, and lack of flexible exit points puts many investors off.
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