INVESTMENT
Indeed, Unite says it will be investing
“only in central locations in the strongest university cities” – a highly selective strategy. Yolande Barnes, head of research at
Savills, says that while first class locations will continue to show high growth, “the market will become more polarised”. She warns that investors will have to consider “at a highly localised level” the combination of both academic prospects (how well- equipped a given university is to attract students) and market prospects – how much accommodation is available. Her colleague Marcus Roberts, head
of student housing investment at Savills, warns investors that “there is a tranche of third-class university towns and cities where supply is high and student demand is expected to dwindle alongside rents.”
Swish new build versus traditional and relatively grotty – a student’s choice.
2010-11 already saw a flight to quality,
with many investors preferring the Russell Group and 1994 Group universities above others (though it’s fair to say that Savills doesn’t believe all the Russell Group universities are ‘buys’). Savills research has detected clear buy and sell signals in different locations; 38 per cent of university towns and cities are in the ‘sell’ category, compared with only 27 per cent firm ‘buys’, which underlines the fact that there is now a substantial downside risk in some areas. Ray Withers of Property Frontiers
suggests that investors should also choose towns with more than one university. That’s one reason his firm selected a Liverpool investment for its clients. There are three universities (University of Liverpool, Liverpool John Moores University, and Liverpool Hope University), and the student population has grown strongly over the years. Supply and demand in the property
market must also be taken into account. First of all, obviously, the supply of university accommodation differs from town to town; Jennet Siebrits says that n some cities, such as York and Southampton, more than half of all students are living in private rented accommodation. Brighton and Hove, Dundee and
Glasgow are other areas where demand vastly outpaces supply; and Edinburgh has a strong student market, with the Edinburgh Festival allowing property owners to generate extra revenue outside term time. But the overall property market must
also be taken into account. In Leeds and Manchester, for example, not only are there a good number of student properties, but an oversupply of newbuild small flats at heavily discounted prices has created competition for traditional student properties. Potential landlords need to do their homework before they put their money down. Given that a big slug of student housing
In some areas the oversupply of newbuild flats has created competition for traditional student properties.’
is owned by a quoted group, of course, they might also like to look at what the City thinks of the sector. Unite currently trades at a 30 per cent discount to the value of its assets, while the real estate and property services sector as a whole trades at a premium, and even REITs only trade at a three per cent discount. The stock market, at least, isn’t convinced of the case for student property.
Do you have any views to share?
www.propertydrum.com/articles/studenthomes
PROPERTYdrum MARCH 2012 57
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