Investing in Student Property

7/29/2019 Investing in Student Property

1/8

GUIDE TO

INVESTING IN

STUDENT PROPERTY

[email protected]

0845 8623090www.hanwoodholdings.com


2/8

M

ost people associate buy-to-let

investment with the purchase

o one or two-bedroom

lats and trying to make single igurereturns on the residential rental market.

However savvy investors now associate

UK property investment with the rapidly

emerging student accommodation

sector which is providing extremely

healthy returns.

Recent research carried out by buy-

to-let mortgage specialist Paragon

Mortgages shows that students

generated the highest yields or

landlords in 2011. Using independent

research rom The Landlords Panel rom

BDRC Continental, the lender ound that

students generated the highest average

yield, ollowed by young singles and

retired people. At the other end o the

scale, non-housing allowance beneitclaimants generated the lowest yields,

ollowed by young couples and manual

workers.

Commenting, Nigel Terrington,

Paragon Group chie executive, says:

Yields are an important component

o a landlords overall business plan

because they give a good indication o

the income that the property generates.

Student yields typically outperorm the

wider market because they are let on

a per room basis, which can generate

higher rental income.

Ranked yield tables Landlords top 101 Students

2 Young singles

3 Retired

4 White collar or proessional workers

5 Executive/company lets

6 Local Housing Allowance claimants

7 Older couples

8 Families with children9 Young couples

10 Blue collar/manual workers

Source: Paragon Mortgages

The rapidly

emerging studentaccommodationsector is providingextremely healthyreturns

INVESTING IN STUDENT PROPERTY


3/8

The act that UK student

accommodation has thrived over the

past two years, rapidly outpacing the

UKs conventional property market, has not

gone unnoticed. In act its ast growth and

investment strength has been so prolic that

in January 2012, The Times ranked student

accommodation as the top asset class in theUKs property market.

Knight Franks 2012 student property

report added to the accolades, stating: It

has outperormed every other commercial

property class and delivered consistent

returns throughout the economic downturn.

The market

When compared with other residential andcommercial property, student property

stands out as consistently oering higher

returns or investors. 2010 saw student

property oering annual average returns

o 13.5% in a market where commercial

property grew by just 8% and standard

residential property ell in value by 1.3%.

Average returns across the UK were 11.5%

in 2011 and Knight Frank expects totalreturns rom student property to increase in

2012 to 12% with rental yields growing

by 5%.

James Pullan, head o student property,

Knight Frank, says: There is a large structural

undersupply o student accommodation in

the UK.

There is still strong and as yet unmet

demand or properties oered to students

or rents o less than 200 a week, oering

investors a good opportunity in the comingyears.

New unding arrangements will come in

September 2012 when tuition ees o up to

9,000 a year are introduced. However all

the early indicators suggest that once again

there will be more applications than places

oered.

In January 2012

The Timesranked studentaccommodation asthe top asset classin the UKs propertymarket

Total returns comparisons 2011 chartPast returns rom Student Accommodation

Average studio rent: 178

Average en-suite rent or 2010/11: 112

Average rental change(year to December 2010):

2%

Average capital value charge(year to December 2010):

7%

Rental yield (December 2010): 6%

Total Annual Return 2010: 13%Total Annual Return 2011: 11.5%

Forecast Annual Return 2012: 12%

Source: Knight Frank Student Housing Report



4/8

T

he popularity o student

accommodation amongst investors

is ultimately driven by consistent

occupancy rates o 99% or higher anda structural undersupply. Demand or

purpose built student rooms amongst

students is extremely high meaning

average rental rates have risen year on year,

increasing by 34% between 2005 and 2010.

The strongest perormance in student

accommodation so ar has naturally

been centred around the most popular

university towns and cities. Durham, Cardi,

Birmingham, Liverpool and Nottingham

are all good examples o where residential

property prices are relatively low yet rental

rates are rapidly increasing due to the

popularity o the local universities and the

number o students attending them.

Investors have not been slow to catch

on and are capitalising on this. As a result

investment in UK student accommodation

has boomed over the last ew years. CBRE,a world leading real estate adviser, recently

released a report that stated 863 million

was invested into student accommodation

in 2011.

This gure represents a signicant

increase o 93 million compared with 2010

and a staggering 120% increase on the

amount invested in 2009.

This growth trend is certainly continuing

with CBREs latest 2012 Q1 report

highlighting that 246m has already been

invested into the student housing sector

during the rst quarter o this year. I this

rate continues student accommodation

investment will be 12% higher than last year.

246m has alreadybeen invested intothe student housingsector during thefrst quarter o thisyear



5/8

The ace o the UK university

education and, consequently, the

student accommodation market is

changing. Currently there is extremely high

demand to attend university - a demand

that ar out-strips supply. In 2010 there

were over 700,000 applications or just490,000 university places.

This demand looks set to continue

particularly in top-fight university cities.

Knight Frank reports on a fight to quality,

with students seeking the best courses

or their ees. This shit in turn is predicted

to translate on to the student property

market in the orm o an increased

demand or a higher standard o student

accommodation.

AEGON Asset Managements

Kames Capital believes there are huge

opportunities or those investing in thesector. Its head o property investment, Phil

Clark, says: The alternative property sectors

could oer some attractive opportunities in

2012.

In particular I believe investors

should consider a greater exposure to

alternative sectors such

as residential property,

student accommodation orhealthcare property. One

o the key attractions o

these alternative sectors is

they generally have a high

income yield, an ability to

track infation and have low

vacancy rates.

Student accommodation

demand or the bestuniversities is leading to

typical annual vacancy rates

o less than 2%.

Student demand for university places exceeds supply

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: UCAS

Surplus demand Accepted applicants



6/8

B

ut that is not all. The growth in

university applications has been

signicantly infuenced by a rise in

overseas students which is predicted toincrease even more in the next academic

year.

In 2010 the number o overseas students

applying to UK universities increased by

12.5%, and there were even more in 2011.

Experts have cited the appeal lies with the

quality o university education in the UK

and competitive tuition ees on a global

scale.

Knight Frank believes the demand is

going to keep on growing. Its 2011 student

property report states: Clearly, a UK

university education continues to be held

in high esteem around the world and this

demand is set to expand exponentially in

line with global wealth generation. The

number o UK universities, by comparison,is a nite resource and looks set to remain

so as government budgets are constrained.

In light o the recent increase in

university tuition ees, this growing trend

looks set to continue. The Sunday Times

explained this is because overseas students

have a dierent ees scale and are less

aected by the changes. While higher ees

may deter some domestic undergraduates

and reduce applications, the amount o

overseas students are not only orecastto remain unaected, but are likely to

increase.

With numbers o EU and domestic

students capped, universities are

extremely keen to market themselves

on an international scale to attract more

overseas students. This aects the higher

end o the student accommodation

market as overseas students have a highertendency to choose quality purpose built

accommodation or a number o reasons

including security, location and acilities.

USA 20%

UK 12%

France 8%

China 7%

Australia 7%

Germany 7%

Canada 5%

Japan 4%

All Others 30%

Top host countries of international students 2010

Source: Atlas of student mobility, Institution of International Education

USA

Others

Fr

ChAuGe

Ca

Ja

UK

Source: UK Higher Education International Unit / i-graduate

USA

Australia

UK

Canada

Singapore

New Zealand

Netherlands

Malaysia

China

Germany

0 5,000 10,000 15,000 20,000

Country rankings - average annual tuition fees

for overseas students

Overseas students

have a highertendency to choosequality purpose builtaccommodation ora number o reasonsincluding security,location and acilities



7/8

S

imilar to overseas students, mature

students also opt or higher

quality student accommodation

usually within private, purpose builtdevelopments. The changes in tuition ees

will also have an impact as Knight Franks

2011 student property report explains:

Changes in the way that higher education

is provided in the UK will change the ace o

the student population.

With universities under increasingpressure to provide more two-year degrees

and work-based learning (particularly in

proessions such as surveying, accountancy,

business and media), the number o

mature, part-time and post-graduate

students is likely to increase signicantly, as

is the average age o students.

The growing demand or student

accommodation, especially higher quality

developments, comes at a time when this

type o property is in short supply. And

we all know what happens with limited

supply and growing demand... It is a major

opportunity or investors.

Mature studentsalso opt or higherquality studentaccommodationusually withinprivate,purpose built

developments



8/8

What sets us apart?We understand that purchasing investment property at home or abroad can

developers and agents, its important to work with people you can trust.

We are committed to sourcing only the very best products in our territories

to deliver the desired rewards to our customers and this has been key to

our success. Centred on a set of 5 key principles, we carefully select the bestdevelopments that deliver on price, payment, location, investment and security.

Please note that the information that we distribute is produced with great care and believed to be correct at the time of publishing to

the best of our knowledge. Pictures, layouts and other details in this brochure are given as a general guide and may change from time

any market forecasts we provide are accurate and well researched at all times, however we cannot ultimately warrant the accuracy of

further agreement we may make with you in writing.

[email protected]

0845 8623090www.hanwoodholdings.com

Documents

Investing in Student Property