Student market teaches a key lesson in resilience

Once again it is the middle-class locations that are proving most popular

One unexpected, and positive, outcome of the effect of Covid-19 on the residential property sector has been the revival of the student market. Six months ago, the closure of Scotland’s universities – especially the elite few that attracted talent from other parts of the UK and overseas – led to a mass departure of students from their relevant cities. Obviously this was because there was no reason for them to remain, but also because, in Scotland, tenants who decide to leave a rental property are required to give just one month’s notice – unlike in England where conventional leases (of at least six months) are still operable. This, of course, hit landlords badly, especially as there were barely any takers available to take up the consequent empty space. Indeed it coincided with working tenants seeking rent reductions or holidays because their jobs were under threat or they had been placed on short-time working. Because, back at the end of March, many people were looking at Covid-19 in apocalyptic terms, no one had any idea when university life would resume and should it do so, if students would be prepared to return, pre - ferring the security of their family homes.

But these fears were unfounded. While universities are opening in a manner more limited than normal, the students are coming back and demand for accommodation has returned to something like nearnormal. For a while, I believed landlords would have to accept a limited reduction in rental levels to let their accommodation, but this has turned out not to be the case.

Once again it is the middle-class locations, within walking distance of the seat of learning, that are proving most popular – in other words, Marchmont and Bruntsfield in Edinburgh and Hillhead in Glasgow. The dimensions of these properties – usually built around the turn of the 20th century – was what made them suitable for converting to HMOS (houses of multiple occupation), which clearly appeals to typical students keen to share costs and tasks. In addition to the high level of rental income, these properties have proved first-class investments in terms of capital growth. Indeed, landlords include parents of students who ensure a son or daughter is living in a safe and comfortable environment over which they have control, while making a nice return on their investment.

Less enamoured are some permanent owner-occupiers whose domestic environment can sometimes be worsened by students moving in nearby. As someone who’s had to address some of their concerns directly, I can sympathise and believe there should be some arbitrary limit on conventional flats available to student groups in any one street. These young people significantly boost the local economy and I am by no means opposed to them living alongside other members of society. However, a city like Edinburgh needs to avoid whole areas becoming “student ghettos”. Such an outcome would not only be bad socially and culturally, but there are potential financial consequences too. Take The Meadows area of Edinburgh, which benefits from open views, good-quality accommodation and easy access to all central amenities. This should normally appeal to the highvalue, executive-type tenant but not if it means sharing one’s home environment with groups of young single people (no matter how polite they might be).

Unfortunately, the effects of the university revival has bypassed one sector of the rental market: luxury developments (such as Edinburgh’s Quartermile) which were occupied by overseas students who will not be returning for the start of the new term. These occupiers’ parents were prepared to ensure their offspring had the very best in security and home comforts. While their absence will be a big loss not just to landlords but the city in general I am prepared to predict the vacancies will be partly taken up by affluent tourists seeking more privacy and consequently switching from high-end hotel accommodation to luxury rentals. As one door closes…