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Category: News

What makes student accommodation an attractive asset?

Jerald Solis, Director, Experience Invest

The UK stands out as a leading provider of higher education, accommodating some of the world’s top ranked universities.

The most recent 2019 QS World Rankings saw UK universities secure five of the top 20 places. What’s more, British universities also took first place in 13 out of 48 subject rankings, demonstrating the country’s expertise across a spectrum of disciplines.

It should come as no surprise then that undergraduate and post-graduate students from all around the world are readily flocking to UK universities. According to UCAS, over 500,000 international students study in the UK every year. Coupled with high numbers of domestic students, this means there is consistently high demand for suitable, term-time accommodation in university cities and towns.

Over the years, student accommodation has become a leading asset class for domestic and international property investors, yet for those who are unfamiliar with the market, student accommodation can seem overwhelming and complex. So, for buy-to-let investors keen to pursue new opportunities in this market, what are some of the factors to bear in mind?

What is PBSA?

Of the two most common forms of accommodation that students studying away from home might consider, Purpose-Built Student Accommodation (PBSA) might not be as familiar as traditional, private rented accommodation.

Unlike the latter, PBSA is built specifically to suit the particular needs of today’s students. It typically refers to one or more blocks of flats that are complete with other facilities to service the student tenants, such as laundrettes and catering.

In 2017, the UK PBSA market was estimated by Knight Frank to be worth £46 billion; but importantly, this number is growing. To meet the demand for bed spaces, the provision of PBSA is also on the rise – some 11,000 purpose-built student bedrooms are due to be delivered in the 2019/2020 academic year.

So how are investors responding to the flourishing market? According to a recent independent survey commissioned by Experience Invest, there is strong appetite for this type of property; in fact, almost one in four (24%) of the 500+ property investors polled said they were considering investing into student property in 2019.

What to consider when choosing to invest in a PBSA

For those considering investing in PBSA, there are a number of key factors to consider – namely, location, and the quality of amenities.

As with any property, the location is often key to a successful investment. And with student property, there are certainly a number of key hotspots that offer promising potential.

For one, investors should keep an eye on towns and cities boasting two or more well-regarded universities. Otherwise known as mature markets, these locations are typically home to a large student population.

Examples of mature markets include Liverpool and Newcastle, where investors can find opportunities like Aura Student Liverpool and Opto Student Newcastle. These contemporary new-build developments offer high-quality facilities that cater to the diverse needs of the modern student.

However, it’s not just the city or town itself that is important. The location of PBSA is also extremely significant. Not only should they be within close proximity to university grounds, they also need to cater to the lifestyle needs of students. This means having close access to things like bars, restaurants, cafes and parks.

We must remember that student demands for accommodation are not what they were 20, or even 10 years ago. As a result, PBSA need to house the facilities and amenities that reflect modern student demands.

Developments that offer residents contemporary living facilities like gyms, laundrettes, and even games rooms are likely to draw students looking for the convenience of on-site amenities. Particularly with a growing emphasis on maintaining a healthy lifestyle, many students will be looking for these ‘extras’. A survey of UK-based students by SPCE uncovered that the average spend on monthly gym memberships now far outstrips the money spent on alcohol. Furthermore, fast, reliable Wi-Fi is now a necessity in any student accommodation.

Finding a PBSA that appeals to the modern student does not need to be complicated if investors know where to look. Meanwhile, with a strong pipeline of developments in the works, the options for those considering investing in the student property market are steadily expanding, with some exciting opportunities on offer across the country.

With the UK population over 66 Million does land investment actually exist?

As of 2017, the UK population reached approximately 66 million. That is quite a large number for a relatively small island nation. We are fairly lucky to say that a large proportion of these people have access to homes; however, not everybody does. As this number grows, the demand for housing will also grow. As will the demand for supermarkets, shopping centres, schools, hospitals and so on and so forth. This means that although we have a large amount of the aforementioned buildings and institutions, it is highly likely that we will have to build some more. However, this is becoming increasingly difficult, because the amount of land stays constant as the population increases. Let us, therefore, briefly have a look at a few reasons as to why one could argue that there is not enough land in the UK to build developments on.

One reason for this potential deficit in land is because we must preserve certain areas within the countryside. Green-belt land ought to be preserved, in order to promote biodiversity within the countryside and to protect the environment. If we were to build over it, we would not achieve those objectives and we would destroy something which the United Kingdom is known for.

Furthermore, certain areas of land are protected because they are cultural heritage sites. These sites teach people a lot about the history of the United Kingdom and prove to be good tourist attractions too. If we were to build all around them, we could destroy our own tourist industry and also destroy culturally important landmarks.

In essence, these are just two reasons why the UK has little land to build developments on. In my opinion, they are very valid reasons and so we mustn’t argue against them. In order to build more, we must use space efficiently. It sounds quite simple; however, it requires a lot of time, effort and attention to detail.  

The risks of service accommodation property investment

Serviced Accommodation, or serviced accommodation properties, is one of those terms that you tend to hear quite often. However, more often than not, people do not really understand what is meant by the term serviced accommodation property. They tend to be confused because they simply do not have a proper definition. According to Property Investments UK, serviced accommodation refers to fully furnished properties which are available for short or long-term let. Investing in such properties can seem like a good idea, but there are risks. Let us, therefore, briefly have a look at some of those risks.

One risk when it comes to buying a serviced accommodation property is that it requires a lot of effort. For people with a full-time job, it would be almost impossible to go through the proper procedures which are required in order to purchase such a property. Moreover, it quite often requires a team of people rather than a single individual.

Furthermore, when investors rent such properties, it seems that their returns aren’t quite what they expected them to be. Thus, we see that the return profit may not be quite worth the hassle of purchasing such a property. The reality for most serviced accommodation owners is that their property loses value overtime, so the hassle becomes even more apparent (and the risks are even greater).

These are just a few of the risks associated with purchasing serviced accommodation properties. They should always be considered before purchasing such a property, because you want to minimise your chances of losing out. Nonetheless, people do purchase said properties, and end up doing quite well. In order to succeed, you must simply plan well, research well, and execute well.

Fixed Mortgage Rates Continue to Fall

As a kid you tend to focus on the simple pleasures that life has to offer. You enjoy being outside, playing with toys and hanging out with your friends. As you move closer to adulthood, however, you have to start to focus on slightly more complex things. One of the things that you have to focus on is mortgages. Mortgages are complicated things that the vast majority of people have to worry about. One particular type of mortgage is a fixed mortgage. As of late, fixed mortgage rates have fallen and continue to do so. Let us, therefore, explore what this means and the effects that this could have on the wider world.

Before we start, however, I’d like to offer up a simple definition for a fixed mortgage. A fixed mortgage is a mortgage which guarantees that your mortgage rate will stay the same until the mortgage period ends. This period can be any amount of time, but typically is between 2-10 years. According to the Chelsea Building Society, fixed mortgage rates have reached record lows of 1.84%. One contributing factor is the low interest rate set by the bank of England.

Another contributing factor is the vast amount of competition which has led to some mortgage firms lowering their prices. As such, people have decided to purchase fixed mortgages whilst they can. These purchases are also partially made due to anxiety because of the possibility of higher mortgage rates in the future. 

In conclusion, I hope to have briefly explained what fixed mortgage rates are, why they are falling and the effects that this could have. In order to save money on your mortgages, you should use comparison sites; however, ensure to be careful when doing so.