Stu­dent prop­er­ties pass with fly­ing colours

Stu­dent flats in the UK are be­com­ing more and more of a high-yield­ing as­set class, writes Michelle Funke

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STU­DENT prop­erty has per­formed ex­tremely well in the UK as an as­set class over the past three years com­pared to the tra­di­tional prop­erty in­vest­ments. In fact, Craig Ill­man, a di­rec­tor of UKbased in­vest­ment com­pany Prop­wealth, notes that stu­dent flats have out­per­formed stan­dard the com­mer­cial prop­erty yields dur­ing the eco­nomic down­turn and are at­tract­ing large in­vest­ment funds and savvy buy-to-let in­vestors through­out the world.

“The driv­ing fac­tor,” he says, “is there is a huge un­der­sup­ply of pur­pose-built stu­dent ac­com­mo­da­tion in the UK and re­cent plan­ning changes are mak­ing it more dif­fi­cult to de­velop stu­dent prop­er­ties. Lim­ited sup­ply, cou­pled with ris­ing global in­ter­est in the UK’s ter­tiary ed­u­ca­tion sys­tem, points to fur­ther de­mand and ris­ing rental re­turns in this sec­tor.”

In ad­di­tion, he says, in­ter­na­tional stu­dent mo­bil­ity is in­creas­ing ev­ery year and rose five-fold be­tween 1975 and 2008, with the num­ber of non-EU stu­dents ris­ing by 12% in 2009 and EU stu­dents by 6%. Fur­ther­more, the in­ter­na­tional fees charged at UK uni­ver­si­ties are glob­ally com­pet­i­tive.

Uni­ver­si­ties are be­com­ing more com­mer­cially minded to at­tract the best cal­i­bre stu­dents as pos­si­ble. Many cam­puses are spend­ing mil­lions of pounds on de­vel­op­ment and in­fra­struc­ture up­grades to make them­selves glob­ally and lo­cally com­pet­i­tive.

“More than 550,000 stu­dents en­tered UK uni­ver­si­ties this month with more than 70% look­ing for ac­com­mo­da­tion in the pri­vate sec­tor,” says Ill­man. “A large per­cent­age of stu­dents pre­fer newly-built ac­com­mo­da­tion that of­fers life­style and prox­im­ity to cam­puses and so­cial at­trac­tions. It is pre­dicted that prop­erty close to the best uni­ver­si­ties will be­come more sought af­ter. Strike now, and you could end up with an as­set that in­creases in value while it earns ex­cel­lent rental re­turns.”

But, he says, as with any in­vest­ment it is best to look at all the an­gles and to weigh up the pros and cons. Con­sider the re­sale value. Stu­dent flats should be treated as com­mer­cial units so don’t buy to flip. The re­sale value will be re­lated to the yield so in­vest­ing close to grow­ing uni­ver­si­ties makes sense, as de­mand will in­crease yields over time.

Many stu­dent stu­dio de­vel­op­ers are of­fer­ing guar­an­tees of a five-year, 8%-9% gross re­turn. All the de­vel­oper is do­ing is build­ing rental yields for the pe­riod into the sale price, which means the buyer pays for his or her own rental yield over the five years. The UK is awash with horror sto­ries once th­ese guar­an­tees ex­pire, when the ac­tual rental mar­ket takes care of the level of rental. Most in­vestors’ yields have dropped sub­stan­tially, so treat stu­dent lets as nor­mal buy-to-let in­vest­ments and let the cur­rent rental mar­ket dic­tate the yields when buy­ing, not an ar­ti­fi­cial re­turn set for sales pur­poses.

Fi­nally, Ill­man says in­vestors need to make sure the prop­erty is fully man­aged by a re­li­able and fo­cused stu­dent rental com­pany.

Prop­wealth has iden­ti­fied Liver­pool as a new up-and-com­ing hotspot for stu­dent de­vel­op­ments and buy-to-let prop­er­ties. This is be­cause Liver­pool is en­joy­ing ex­cel­lent growth and stu­dents are at­tracted to the high qual­ity of its uni­ver­si­ties, tourism, nightlife and ex­cel­lent life­style.

“There are more than 50,000 stu­dents in the Liver­pool catch­ment area and a se­ri­ous short­age of hous­ing. Liver­pool Univer­sity is part of the Rus­sell Group, which in­cludes Cam­bridge Univer­sity, Lon­don School of Eco­nom­ics, Ox­ford, Univer­sity Col­lege Lon­don and 14 oth­ers through­out the UK. Fur­ther­more, Liver­pool Univer­sity has just an­nounced a £600m in­vest­ment mas­ter plan to in­crease its world-class stan­dard even fur­ther, tak­ing it into the top 1% in the world,” says Ill­man.

Prop­wealth is of­fer­ing South African in­vestors an op­por­tu­nity to ac­quire a unit in Pall Mall House Stu­dent Stu­dios, sit­u­ated in the cen­tre of Liver­pool’s busi­ness, com­mer­cial and so­cial area, just 300m from Liver­pool John Moore Univer­sity with 27,000 stu­dents.

“This be­spoke de­vel­op­ment con­sist of 25 fully-fur­nished en­suite stu­dios, com­mu­nal ar­eas, laun­dry fa­cil­i­ties and ex­tras such as bike stor­age ar­eas and CCTV,” says An­thony Doyle, a di­rec­tor of Prop­wealth. “Pall Mall House Stu­dent Stu­dios will be aimed at more ma­ture stu­dents and post­grad­u­ates. We have en­listed a top stu­dent rental com­pany to man­age the de­vel­op­ment, mak­ing it an ex­cel­lent dis­tance in­vest­ment.”

Cur­rent rental yields re­flect a net re­turn of 8% and Pall Mall House is due for com­ple­tion by Au­gust next year in time for the new univer­sity year.

Doyle and Ill­man will be in Jo­han­nes­burg on Oc­to­ber 30 and 31 and in Cape Town on Novem­ber 6 and 7 and are invit­ing in­vestors to dis­cuss this op­por­tu­nity. To book an ap­point­ment, e-mail info@prop­wealth.co.uk.

Price:

From £50,000 to £59,500.

Con­tact:

Prop­wealth Craig Ill­man UK of­fice +44 1273 732 069 UK cell + 44 7500 166 982 SA cell 083 250 0388

Pall Mall House Stu­dent Stu­dios.

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