Agent urges investors to beware of student accommodation bandwagon
Investment in student accommodation is the big thing in the UK right now, with two billion pounds ploughed into the sector in the first three quarters of 2012 alone. Market specialists, PDR Property Solutions, warn that not every bandwagon is worth jumping on.
Paul Rossiter, MD of Canary Wharf-based PDR Property Solutions, explains, “Despite being described as ‘the most coveted property class’, not all student accommodation is worthy of investment. The cheap end of the market targets the domestic student population, a segment that is on the wane according to admissions service UCAS who noted a 10% drop in English applicants for 2012, and could therefore become stagnant at best. Meanwhile the peddling of ‘pods’, as opposed to individual self-contained units, poses another threat to resale down the line as banks won’t lend on standard student rooms. Also, buy in the wrong location far from the city centre campus, and you won’t have queues of undergrads knocking your door down wanting to rent.”
In fact PDR Property Solutions advises would-be investors to look to the top end of the student accommodation market and choose a product that is self-contained and fully managed to make it hands- and hassle-free. Whilst the investment outlay may be greater, this is a sector that is set for steady growth as it caters to the burgeoning foreign student population. The UK is seen as a safe, affordable and prestigious place in which to study higher education and the number of overseas applicants is expected to rise significantly over the next decade. And, with higher budgets at their disposal, quality is what they’re after.
Paul continues, “Foreign students will typically only live in top-end accommodation. They do not want to ‘slum it’ in low-grade ‘pods’ with poor finishings and facilities. Instead they want modern comforts, security, communal facilities, high speed internet and proximity to their particular faculty. For the investor, the returns are higher and there is also some suggestion that international students make more reliable tenants who are likely to stay in the same accommodation for the duration of their course rather than branching out into the private rented sector like their domestic counterparts.”
Ironically, student accommodation is a market that thrives in a recession. Many young people see higher education as a way of getting extra skills and an ‘edge’ over their peers for when the job market picks up. Student housing supply remains on the low side, particularly at the quality end of the spectrum, and as a result term-time vacancy rates are minimal, 1% to 4%, which is at least a third of the vacancy rates in other buy-to-let scenarios. Contracts are generally signed for 48 weeks a year with parents often acting as guarantors.
Furthermore, success in student accommodation investment is not limited to London. Many of Britain’s secondary cities have respected universities with vast student populations and, as expected, the entry level costs are lower than London. With over 50,000 students in its confines, 6,000 from overseas, three leading universities, a language academy, institute of performing arts and a school of tropical medicine, Liverpool stands up as a very strong candidate.
Vita at Tinlings in Liverpool is the second phase of a £27 million redevelopment project which follows the success of Vita at The Chapel, launched in March 2012 and now completely sold out. With a total of 120 units, Vita at Tinlings is a complete re-model of the previously iconic Tinlings building built in the early 1960's and it dominates Victoria Street, the major route through the heart of the city – postcode L1. Visually striking, the entire building is glazed with a modern curtain walling system and with aspects to three sides, its exterior shines out on to its city surroundings.
Contemporary in design and with a level of quality never seen before, seven storey Vita at Tinlings uses floor-to-ceiling glass windows to maximize the light in the en-suite studios and suites which are fully furnished and completed to the highest specification – including wall-hung flatscreen TVs complete with Freeview and complimentary high-speed broadband.
As well as providing a focal point for Vita residents to meet and relax in its spacious lounge area, the communal area of Tinlings includes entertainment spaces housing pool tables and a video game station alongside a fitness centre featuring state-of-the-art equipment. There are also spaces designated for study with workstations and group study areas including breakaway rooms to encourage collaborative learning.
For the investor, Vita at Tinlings offers a hassle-free, fully managed property investment with assured returns - a minimum of 9% net per annum for the first two years. Investors have a choice of self-contained studios and a select number of two, three and four bedroom suites. Prices start from £60,450 and a six year non-status payment plan is in place for improved financial accessibility.
For more information, visit pdrpropertysolutions.com.
