#AskaUKPropertyExpert – How to compare student property investments
The pool of global “travelling students” is predicted to double to eight million by 2025, with Britain set to attract more than the US, according to the British Council. These students need to live somewhere – and can pay.
Due to the weakening of the pound sterling, it is now more attractive to international students to study in the UK, as tuition fees have fallen by up to 20% for them (and this is not considering living costs).
Those who are concerned that Brexit will have an impact on the number of EU citizens studying in the UK can allay their fears. In 2015/16 students studying in Britain from the EU accounted for just 6% of the total number of students, and regardless, many universities have confirmed that they will not be raising their tuition fees for EU students, so expenses should not be a concerning factor. More than 430,000 students come from overseas to study in the UK, and at the University of Liverpool alone, almost 7,500 students are from overseas. Regardless, Gordhan’s exit from government in South Africa is having far more of a negative impact than Brexit is on the UK’s economy. In our recent article, Gordhan Exit v Brexit, Compare the impact and potential outcomes, we explain why investing in Britain is still a good idea for South Africans looking to avoid the impact the political turmoil can have on their savings.
Student accommodation developments operated by educational institutions have fallen by almost a quarter between 2006 and 2016, yet the number of people going to university between this period has risen, especially from overseas. These factors mean that there is an increasing reliance on privately rented student accommodation, and a larger market for it.
The days of a landlord letting out a house in the suburbs to students instead of a family are starting to disappear. Students are becoming increasingly discerning customers, where branding, amenities and location is becoming increasingly important.
“The trend has moved rapidly towards purpose-built student accommodation becoming the norm,” according to Stride Treglown architects and project managers.
New accommodation must be built; the solution provides an interesting opportunity for people to joint venture with the developers to facilitate the new development of the much-needed student accommodation.
Although, the student property funds are active in the market, every day investors also can take part in this lucrative investment market.
One Touch Property Investment, which has won numerous property awards and accreditations, including the Property Wire Award for the Best Student Property Investment Provider 2017, has helped hundreds of investors to purchase student accommodation investments.
A student accommodation investment is perfectly suited towards overseas investors and retirees alike, because the onsite management company takes care of every aspect of the property lettings and management.
One Touch’s investment director, Arran Kerkvliet, says: “A lot of people prefer purchasing actual bricks and mortal rather than investing in a student property fund. It just makes more sense to them because they can own a studio or en-suite room (Pod) similar to the ones their sons and daughters would have stayed in at university.
“Most of the investments are off-plan, whereby the purchaser contributes a certain portion towards the build cost – typically £27,000 – during the construction phase and what they get in return is a fully managed, high-yielding investment property.”
We can compare and contrast some recent opportunities in terms of some of the most common considerations, namely:
- Supply and demand
- Return on investment
- Rental guarantee period
- Credibility of the developer
- Ongoing management company
Supply and demand
Often the demand for student accommodation is related to the number of students attending the universities, which is often a function of the university ranking. Universities such as Liverpool boast an enormous student population of 70,000, and new campuses are being built all the time; an example of which is Liverpool John Moores University’s plans to develop a campus at the Royal Mail’s former sorting site at Copperas Hill. This will mean that there will be an increased demand for units at student accommodation developments such as Sir Thomas, which already has an advantageous location and features such as the period façade, large windows and onsite amenities.
The other balancing factor is the supply side; you can keep abreast by reading student property guides and looking at local law changes such as the Article 4 Direction, which has been adopted in places like Nottingham, Newcastle, Liverpool and Leicester. Article 4 basically restricts the conversion of single-family homes into student residences, thereby limiting supply.
Return on investment
The bulk of student properties are purchased off-plan up to a year to completion. Some developers offer interest paid on the deposit but for the majority, that means that there will be no return on investment for the first year.
There is a student accommodation investment in Chester that offers investors an 8% net return for five years from August 2018, and 5% interest on deposit. Compared with the typical bank savings rate of 2%, that is certainly very attractive to investors who are prepared to wait for it to be completed in August 2018.
Credibility of the developer & management company
It is vitally important to know who are working with as the outcomes could end up being disastrous.
Using a specialist student property broker, like One Touch Property Investment, could help you avoid damaging situations through the process of conducting background research on the developer; this helps you to select trustworthy partners and reputable management companies to work with.
“We have helped more than 200 investors acquire student property in the best locations by seeking out reliable partners to ensure that they can take their purchase decision with confidence and ease,” says Kerkvliet.
Who is Arran Kerkvliet?
One Touch Property has been helping people invest in UK property for the past 8 years. Arran Kerkvliet, the investment director, is originally from South Africa and has a degree in Economics and property valuation. He is keen to share some of the common things to look out for before investing in UK property. His company sources a wide range of property including student accommodation investments, high yield property such as hotel rooms and buy-to-let investments for people looking for income producing investments and diversity to their property portfolio.