Unlocking the Potential of PBSA Finance
Purpose Built Student Accommodation (PBSA) has become one of the fastest-growing and most lucrative property sectors in recent years. With demand for high-quality student housing continuing to rise, PBSA represents a fantastic opportunity for landlords and investors looking to diversify their portfolios. However, navigating the world of PBSA finance can often feel like uncharted territory, with unique considerations and challenges to tackle.
To shed light on this dynamic sector, we had the privilege of sitting down with Wes Baker from Hampshire Trust Bank, a leading lender with extensive experience in PBSA financing. Wes shared his expertise on what makes PBSA an exciting market, the key trends shaping the sector, and how lenders like HTB are supporting investors to succeed.
Whether you’re new to PBSA or a seasoned landlord exploring new opportunities, this Q&A is packed with valuable insights you won’t want to miss.
Let’s dive in!
Q: Wes, thanks for joining us! Can you tell us why you think PBSA is such an attractive investment opportunity for investors right now?
Wes: I think any investor wants steady cash flow in their business, and with PBSA we very rarely see a site below 98% occupancy levels. This means from November / December the investor will be able to accurately forecast for the approaching financial year with very little chance of any rental voids. If you compare this to a residential portfolio with ASTs that may be run down throughout the year, it’s far less of a headache to manage. Overall, the longer tenancies offer greater certainty of income and less vulnerability than more traditional investment opportunities.
Q: How does HTB approach PBSA finance differently from other lenders?
Wes: Well in simple terms there are not that many specialist lenders in our space that will actually entertain PBSA, so access to funds can be limited from the get-go.
However, at HTB we have won business numerous times for being more flexible than our competitors, for example offering more leverage, securing new build PBSAs and looking at the client with a holistic mindset rather than putting hurdles in place.
Q: What are the main challenges you see investors face when seeking PBSA finance?
Wes: The biggest challenge for me is actually finding a site, it’s rare we see any being sold as they are so lucrative, but there’s a clear shortage stemming from school leavers, higher university participation than usual and an influx of international students.
Refurbishments are also constant and very important for the owners as they must keep ‘on trend’ with what students expect package wise. As an example, if a similar site down the road has a gymnasium included that’s an additional cost the student doesn’t have to pay separately, then this may steer them away for the coming academic year.
Q: For investors new to PBSA, what should they consider before entering the market?
Wes: Investors should be looking at the proposed site in detail – they will need to understand the age and demand of the site, whether or not the location is underserved for beds and where the university sits in the rankings.
Another key piece will be understanding the running costs for the site as most lenders look at using the net running costs (or NOI) when checking serviceability. This data will need to be assessed to ensure it’s accurate, so know these numbers!
Q: For investors new to PBSA, what should they consider before entering the market?
Wes: I recently read an article in November 2024 that said £64bn of new capital had been earmarked for PBSA, and other sectors such as build to rent, affordable housing and the seniors housing market. So it’s clear that PBSA is one of the most appealing prospects for the next 5 years.
Q: What are the key benefits to investors and landlords in seeking specialist advice, both in working in tandem with a specialist finance brokerage, and working alongside a specialist lender, when leveraging complex security such as PBSA.
Wes: Transactions like this need detailed analysis, so working with a specialist lender like HTB and a complex finance specialist like The Buy to Let Broker can help lay out exactly what’s required to get credit approval from an early stage.
Communication is also key, and at HTB our broker partners get access to underwriters which helps keep the process slick.
Q: What options are there for experienced developers looking to expand into PBSA, as opposed to leveraging against already developed/performing assets?
Wes: I would say it’s hugely important to keep in tune with the market, so definitely sign up to PBSA news / podcasts and other platforms. There’s a lot you can learn with the information that’s out there including proposed new sites, sites needing refurbishment, and which universities are currently underserved.
Q: What options are there for experienced developers looking to expand into PBSA, as opposed to leveraging against already developed/performing assets?
Wes: Student numbers are at an all-time high right now, which is driving demand for PBSA, but there still remains a shortfall of beds across the country, so the growth prospects are still extremely strong.
A huge thanks to Wes for sharing his insights on Purpose Built Student Accommodation finance. It’s always great to get advice straight from the experts, and Wes has given us plenty to think about.
PBSA represents a lucrative opportunity for investors with the right strategy and support. If you’re considering investing in PBSA in 2025, contact the team to explore your potential options and learn how Hampshire Trust Bank can help finance your next venture.
The Financial Conduct Authority does not regulate this form of mortgage. Your property may be repossessed if you do not keep up repayments on your mortgage.
