Home­work needs to be done be­fore buy­ing a stu­dent let

The stu­dent prop­erty mar­ket is chang­ing so is now a good time to in­vest? Sharon Dale takes a look at what is hap­pen­ing.

Yorkshire Post - Property - - PROPERTY -

PUR­POSE-BUILT stu­dent ac­com­mo­da­tion has bur­geoned and many lo­cal au­thor­i­ties are keen to see more of it. But these new rooms, cou­pled with a seven per cent fall in univer­sity ap­pli­ca­tions this year thanks to the rise in tu­ition fees, have un­set­tled the tra­di­tional buy-to­let mar­ket.

Some in­vestors and let­tings agents are con­cerned that de­mand for shared houses could shrink and new re­search by Unipol con­firms their fears.

It re­veals that students in Leeds are leav­ing their tra­di­tional heart­lands in favour of pur­pose­built blocks and city cen­tre apart­ments.

Since 2006, pur­pose-built rooms, mainly in and around the city cen­tre, have in­creased from 12,500 to over 18,500 and the num­ber of students liv­ing in smaller houses has de­clined by 5,911. The num­ber liv­ing in city cen­tre apart­ments rose from 494 in 2007 to 4,791 in 2012.

Mean­while, in cen­tral Head­in­g­ley, stu­dent ren­ters have fallen by 19 per cent over the past six years, while in fringe lo­ca­tions such as Wood­house, Kirk­stall and Bur­ley they have plum­meted by over half.

In 2010, al­most 16 per cent of prop­er­ties in the Head­in­g­ley, Hyde Park and Wood­house area ad­ver­tised through Unipol re­mained empty and just un­der a third of them were left un­let in neigh­bour­ing ar­eas.

This year, there will be up to 2,500 fewer students in Leeds and more houses will re­main va­cant, ac­cord­ing to Martin Blakey, chief ex­ec­u­tive of Unipol Stu­dent Homes, who says fears of stu­den­ti­fi­ca­tion could be re­placed by un­der-pop­u­la­tion and dere­lic­tion.

Ian Pot­ter, manag­ing di­rec­tor of the As­so­ci­a­tion of Res­i­den­tial Let­ting Agents (ARLA), has al­ready called land­lords to ac­tion.

He says: “Land­lords should not be sur­prised by the drop in stu­dent num­bers, which fol­lows on from the hike in fees and on­go­ing tough em­ploy­ment con­di­tions. In re­cent times stu­dent let­tings has been an area of al­most con­stant growth, but it is now time for land­lords to recog­nise that there may be more com­pe­ti­tion for ten­ants. Hav­ing a pos­i­tive rep­u­ta­tion and let­ting good qual­ity prop­er­ties is the best way of en­cour­ag­ing ten­ants, and tak­ing a mo­ment to re-as­sess your prop­erty or port­fo­lio to bring it up to scratch can reap re­wards in the long term.”

An­drew Wells, of auc­tion­eer and val­uer All­sop, says choos­ing the right lo­ca­tion is key.

“Pur­chasers of stu­dent prop­erty in Leeds and Sh­effield are be­ing in­creas­ingly choosy and prime lo­ca­tion means ev­ery­thing. This mir­rors the de­mand from students them­selves who want to be closer to the heart of things, turn­ing their backs on fringe lo­ca­tions and long bus rides. They also de­mand bet­ter stan­dards. A shabby, un-loved stu­dent house even in a prime area will strug­gle to let.”

Those of­fer­ing bet­ter qual­ity are re­warded by higher rents, he says. In Leeds, a prime shared house in good con­di­tion achieves about £78 per week per room. In Sh­effield it is about £75pw. So a five-bed­room stu­dent house in a good area pro­duces about £20,000 a year. The rental yield is about three per cent higher than a tra­di­tional buy-to-let.

Buy­ing ac­tiv­ity is at its strong­est in the spring as in­vestors an­tic­i­pate new let­tings for the aca­demic year in Septem­ber.

“This spring was very ac­tive with about £15m to £20m of stu­dent houses be­ing traded in Leeds,” says An­drew.

“Im­proved avail­abil­ity of buyto-let fi­nance is help­ing. Buy­ers are a mix of par­ents and am­a­teur in­vestors. The large, ex­ist­ing stu­dent land­lords have been less ac­tive buy­ers, most con­cen­trat­ing on re­duc­ing debt and meet­ing their loan covenants.”

He sug­gests that the safest in­vest­ment is in ar­eas close to the old red­brick and re­search in­ten­sive uni­ver­si­ties.

“Pur­pose-built mod­ern blocks are still a ma­jor fea­ture in the mar­ket. This sec­tor has been buoyed by strong in­vest­ment de­mand from a num­ber of UK pen­sion funds as well as over­seas and wealth-fund in­vestors.

“They seem un­con­cerned by the af­ford­abil­ity pres­sures on students in the light of higher tu­ition fees, but this says a lot about the fun­da­men­tal qual­ity of stu­dent cities like Leeds and Sh­effield when com­pared with lower ranked new-wave univer­sity towns.”

The blocks, which have en-suite rooms and shared kitchens to let from £75 to £100 per week, have strug­gled to re­tain students af­ter their first year, not least be­cause it is cheaper and more fun to share.

But Vic­to­ria Loverseed, de­vel­op­ment man­ager for Unipol Stu­dent Homes in Leeds, says: “The ma­jor­ity of students live in houses af­ter their first year, but this is be­com­ing less pro­nounced, with a fall from 31,500 students liv­ing in this type of ac­com­mo­da­tion in 2006 down to around 23,000 this year.

“Shar­ing is still cheaper than liv­ing in a de­vel­op­ment, but not by much. The av­er­age rent in a shared house in 2012 was £67.83. How­ever when you add in the cost of util­i­ties and in­ter­net it is closer to £80 per week, which com­pares to an av­er­age of £93 for room in a de­vel­op­ment in Leeds. So the gap be­tween them is nar­row­ing.”

CORE VAL­UES: Or­chard House has lots of char­ac­ter with many tra­di­tional fea­tures and also comes with a de­tached one-bed­room cottage pro­vid­ing an ad­di­tional source of in­come and ac­cess to the River Seven with fish­ing rights. It also has a large land­scaped gar­den.

PROF­ITS: Stu­dent prop­erty can give bet­ter yields than con­ven­tional buyto-let. But students are mov­ing away from shared houses to new blocks.

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