With the cost of a British university education already standing at about £10,000 a year per student a figure set to soar even further following a widespread increase in annual top-up fees charged by leading universities many anxious parents are turning to the property market to help fund their children’s career in further education. Increasingly, parents are looking to buy reasonably priced three- or four-bedroom houses close to their child’s university, letting out extra bedrooms to other students so that their child can live rent-free, and hoping that rising house prices will ensure that they do not lose on their investment when the time comes to sell.

The experience of one parent probably represents everyone’s dream scenario when it comes to buying a student property. In March 2003, a successful Wiltshire accountant bought a three-bedroom house in Loughborough for his son, who was studying for a degree in aeronautical engineering, for £122,000 (just short of the stamp-duty threshold). The house was in good condition, needing only ‘a lick of paint’ and £50 worth of repairs to the heating system, so they were straight away able to let the spare bedrooms (including the converted dining room) to friends to cover the mortgage taken out in his son’s name. Three trouble-free years later, the house was sold for £142,000, leaving enough profit to pay off most of his son’s student loan.

Not everyone will be so lucky, of course. The cost of buying a student property, and the eventual capital return on your investment (if any) will largely depend on where, and what, you buy. We asked Liam Bailey, head of residential research at Knight Frank, to crunch some numbers relating to Britain’s top 20 provincial universities, as featured in The Sunday Times University Guide 2007. Collating data provided by such eminent sources as HBOS plc, the Higher Education Statistics Agency (HESA), the Office for National Statistics (ONS) and Knight Frank’s own data-base, he has built up a student-property profile for each town, so that parents can make an informed decision about where, or if, they should consider investing in a student property. It certainly makes for fascinating reading.

Mr Bailey offers some solid advice to parents who are looking to not only fund their children’s living costs while at university, but also to secure reasonable levels of both capital appreciation and income for the medium to long term. ‘All “top 20” provincial university towns and cities are, as we might expect, at the top end of the UK city performance league they are all areas with growing local economies and growing employment,’ Mr Bailey points out. ‘In every location, there is a potential investment angle. Always think hard about differentiating your investment from the other student housing that is available.

Students have become very discerning in recent years (something which will not surprise their parents) and they now demand, as standard, good-quality bathrooms and kitchen facilities, as well broadband and satellite television connections.’

Are those wonderfully grotty student pads soon to become a thing of the past, we wonder?

This article first appeared in Country Life magazine on August 24, 2006