INVESTMENT
apartments, intended mainly for post- graduates. Meanwhile UPP has taken over the University of Reading’s portfolio of some 2610 rooms, worth £200m, plus more in the pipeline. Savills reports high levels of institutional deals in both 2010 and 2011. Despite institutional interest, this is still
a good sector for the buy-to-let landlord, and seems likely to remain so for the foreseeable future. It seems likely that institutional investment will be at least partly focused on taking over and updating existing university owned accommodation, rather than on greenfield development. That leaves a large slice of the market available for private landlords. However, HMO legislation has
complicated life for those letting to students, though mandatory licensing is involved only where five or more students are sharing and a building of more than two storeys is concerned. Some councils, worried by the conversion of some areas of their cities to effective student dormitories, have however decided that licensing is required for any HMO; it’s up to the individual council, so investors need to be aware of any local bye-laws or planning requirements. That may be one reason that a new style
of property is now coming to the market - purpose-built student accommodation marketed to the individual retail investor. Property Frontiers, for instance, is offering units in a new development at Gradwell Street, Liverpool, from £48,000 a room. Gradwell Street offers yields of 10 per cent for investors – very much at the high end of residential yields. Other similar developments include
Bankside, in Chester, which is being marketed by Principal International, and The Hub in Sheffield, which is being marketing by Knight Knox, all around the £45-50,000 mark which seems to have become standard for such properties. The Hub offers a 10 per cent yield, while
Bankside has a 7.5 per cent yield, but guaranteed for ten years, appealing to the longer term investor. It’s interesting that the agents are all
companies which handle overseas as well as UK property. They’re not so much selling to parents of student occupants, who have usually used local estate agents, but to investors. These are often the type of high net worth individual who, back in 2005 or 2006, might have been looking at buying property in one of the emerging property markets abroad, but are now keeping their money closer to hand.
54 MARCH 2012 PROPERTYdrum
While first class locations will continue to show high growth, the market will become more polarised.’ YOLANDE BARNES
FUTURE RISKS
So far, the case for buying student accommodation seems pretty good. However, there are a few risks visible on the horizon. According to Savills’ latest research, immigration controls could be one of them. Not only do foreign students account for a large slug of the total student population, they are also the students most likely to book into purpose-built accommodation, and generally among the higher-spending, too. Tighter controls over
student visas could damage that segment of the market – and if foreign student numbers fall, some towns may end up with an oversupply of accommodation. However, James Pullen believes these
controls have mainly affected language schools and ‘feeder’ colleges (what we used to call ‘crammers’). He says the undergraduate, and postgraduate population should be less affected. But higher tuition fees, together with
graduate unemployment, have also led to a downturn in student applications; the number of UK-born students applying to start university in 2012 has fallen by 15 per cent. That may partly reflect an increase in applications last year as students wanted to start their courses before tuition fees rose. Certainly no one’s expecting a repeat of the high growth in student numbers over the last decade; Unite expects student numbers to remain flat for the next few years. The increase in downside risks makes
Foreign students like purpose built homes.
selecting the right place to invest more important than it formerly was. Some cities, such as Leeds and Manchester, are already seeing an oversupply of student accommodation; that has led Unite to look for growth “in towns and cities where the current shortage of accommodation remains most significant,” with London clearly a favoured location.
Massive new blocks are going up to accommodate students.
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