Stu­dent land­lords need to do their home­work

Is stu­dent prop­erty a good in­vest­ment? Sharon Dale in­ves­ti­gates.

Yorkshire Post - Property - - PROPERTY -

THE lat­est Stu­dent Hous­ing Re­port from Sav­ills re­veals a short­age of pur­pose-built ac­com­mo­da­tion, with just one new bed cre­ated for ev­ery eight stu­dents last year.

The po­ten­tial cri­sis is par­tic­u­larly acute in London, where the city’s uni­ver­si­ties can sup­ply only 36 per cent of the bed spa­ces re­quired to meet their ac­com­mo­da­tion needs.

Sav­ills re­search es­ti­mates that the short­fall will be ap­proach­ing 23,000 in London alone by 2014. Other uni­ver­sity cities can sup­ply an av­er­age of around 65 per cent of ac­com­mo­da­tion leav­ing 35 per cent of stu­dents to look for a home in pri­vate rented prop­er­ties.

“We fear that if lo­cal au­thor­i­ties do not en­cour­age suf­fi­cient pur­pose-built stu­dent ac­com­mo­da­tion to be built, we will see in­creased com­pe­ti­tion from stu­dents in the al­ready hard-pressed pri­vate rented sec­tor, which will lead to fur­ther rent rises,” says Yolande Barnes, head of res­i­den­tial re­search at Sav­ills.

This sup­ply and de­mand prob­lem spells big op­por­tu­ni­ties for in­sti­tu­tional in­vestors and for smaller buy-to-let land­lords.

The in­sti­tu­tions could build to let or they could buy and re­fur­bish ex­ist­ing uni­ver­sity halls of res­i­dence.

Ac­cord­ing to Sav­ills, there is a lot of age­ing and dated stock at­tract­ing high re­pair and main­te­nance bills and cuts in Govern­ment fund­ing could prompt uni­ver­si­ties to sell their halls to the pri­vate sec­tor.

Sell­ing off their bricks and mor­tar, says Mar­cus Roberts head of Sav­ills Stu­dent In­vest­ment depart­ment, could prove pos­i­tive for ed­u­ca­tional es­tab­lish­ments.

“Bri­tish uni­ver­si­ties can no longer rely on name and sta­tus to main­tain high ap­pli­ca­tion lev­els from over­seas stu­dents. Tu­ition fees for in­ter­na­tional stu­dents have now risen to £9,300 per an­num for stan­dard cour­ses and £11,500 for lab­o­ra­tory-based cour­ses. At this level, it is fun­da­men­tal that UK uni­ver­si­ties seek ways of

Pro­vided lo­ca­tion is good the re­turns are bet­ter than the con­ven­tional buy-to-let mar­ket.

up­grad­ing and main­tain­ing high stan­dards of res­i­den­tial and non-res­i­den­tial build­ings to main­tain their ad­van­tage over as­pir­ing in­ter­na­tional in­sti­tu­tions.”

He adds: “There is in­creas­ing in­vestor in­ter­est at the in­sti­tu­tional level in this sec­tor. Yields are at a level to com­pete with com­mer­cial prop­erty and have been sin­gu­larly sta­ble through the re­ces­sion which means that cap­i­tal val­ues have not fallen sig­nif­i­cantly. At the same time, rental growth has been strong so to­tal re­turns and prospects for the fu­ture look at­trac­tive.

“In­di­vid­ual stu­dents may each be pay­ing rel­a­tively small amounts of rent, but taken col­lec­tively, a sin­gle build­ing will pro­duce sig­nif­i­cant cash flows with min­i­mal voids and vir­tu­ally no risk of large scale de­faults.

“ A large hall of res­i­dence is sig­nif­i­cantly lumpier than nu­mer­ous, small, dis­jointed houses or flats and this ap­peals to an in­sti­tu­tion seek­ing a mul­ti­mil­lion pound in­vest­ment in a sin­gle trans­ac­tion.”

The ma­jor uni­ver­sity cities in York­shire are well-supplied with stu­dent ac­com­mo­da­tion but both pur­pose-built and shared houses can still rep­re­sent a good in­vest­ment, ac­cord­ing to An­drew Wells, of prop­erty val­uers and auc­tion­eers All­sop.

“Leeds, Sh­effield and Brad­ford have had a fan­tas­tic run over the last six years in pro­vid­ing new pur­pose-built ac­com­mo­da­tion for stu­dents. Com­bined with ac­com­mo­da­tion pro­vided by the uni­ver­si­ties them­selves, some 40 per cent of Leeds full-time un­der­grad­u­ates now have ac­cess to a pur­pose­built stu­dent room.

“This com­pares with 36 per cent at Brad­ford and 28 per cent at Sh­effield. This puts Leeds near the top of the league of UK stu­dent cities in terms of its abil­ity to pro­vide qual­ity ac­com­mo­da­tion for its stu­dents,” says An­drew.

“You may not re­alise that if you have a pen­sion with Pru­den­tial, Aviva or Aberdeen, that the higher ed­u­ca­tion sec­tor may now to be con­tribut­ing, in part, to your pen­sion pot.

“Last year Aviva paid £37m for the Broad­cast­ing Place scheme in Leeds with the Leeds Metropoli­tan Uni­ver­sity as ten­ant, show­ing a sharp yield of 5.85 per cent. Well­come Trust are part­ners with Quin­tain in the IQ stu­dent res­i­dences on Cross Chan­cel­lor Street, Leeds and two blocks in Sh­effield. Pru­den­tial has re­cently bought a block in Bris­tol and is bid­ding for more.”

None of this has damp­ened rents. Ac­cord­ing to An­drew, they have risen by 13.5 per cent over the last two years in Leeds, 7.4 per cent in Sh­effield and 4.1 per cent in Brad­ford.

While stu­dents like to stay in pur­pose-built block and halls of res­i­dence for their first year, many pre­fer to find a house to share there­after.

An­drew says: “Re­turns of 8 to 11 per cent are still avail­able and there is a con­sis­tent hard core of stu­dent ten­ants who elect to share a house. The rental dif­fer­en­tial be­tween shared house and pur­pose-built block has widened to make a shared house rel­a­tively more af­ford­able, though stu­dents are fussy about lo­ca­tion.

“Fringe ar­eas are slow­est to let, or some­times won’t now let at all. In Leeds, Hyde Park Corner is the cen­tre of grav­ity while in Sh­effield, Ec­cle­sall Road is where most stu­dents want to be.

“In­creased reg­u­la­tion of this sec­tor and the re­quire­ment now for plan­ning con­sent to be ob­tained be­fore a dwelling house can be turned into a stu­dent house has un­set­tled some in the mar­ket and there are a good few land­lords who have sold up.

“For those that re­main, how­ever, pro­vided lo­ca­tion is good, the re­turns are gen­er­ally bet­ter than any­thing that can be ob­tained in the con­ven­tional buy-to-let mar­ket.”

But for those think­ing of buy­ing a stu­dent let, be warned that they are labour in­ten­sive and can be a chal­lenge for the novice land­lord.

There are more rules and reg­u­la­tions at­tached to these prop­er­ties and stu­dents are dis­cern­ing.

The smart, well-equipped pur­pose-built blocks have set high stan­dards that pri­vate land­lords are also ex­pected to de­liver.

PUR­POSE BUILT: Stu­dent ac­com­mo­da­tion like Unite’s The Tan­nery in Leeds, above and be­low, has helped drive up stan­dards.

HIGH-SPEC: Unite’s Sky Plaza stu­dent ac­com­mo­da­tion in Leeds.

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