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30 Mar 2017

Why Student Property stayed on top in 2016

New report confirms that UK Purpose Built Student Accommodation (PBSA) continues to deliver

The headlines according to CBRE

- Investment in PBSA £2.7bn 2016 to date, c£3bn forecast. This is already more than 2014’s £2.4bn, while 2015’s enormous £5.6bn was due to exceptional institutional trading
- 21% of investment from overseas
- Capital growth 4.79%
- Average net rental growth of 1.88%
- Record 2016/17 student intake (UCAS)

The sector’s resilience was underlined by a post-referendum recovery in the share prices of listed specialist companies. This was largely attributed to the stability of student rental income and the continuing demand for PBSA.

The report expressed real confidence in student sector fundamentals, and noted that “the weight of capital seeking investment in the sector and the depth and diversity of the investor base over the past three years show the maturity of the market and its international appeal”.

Higher education – a national asset

Whatever else is going on in the world, there are some things you can always rely on, and demand for a UK university education is one of them. Respected around the globe, a UK degree gives a graduate a real head start.

That’s why we’re the world’s no 2 destination for higher education, second only to the United States. We have around 150 institutions playing host to nearly 2.5 million students, including 450,000 from overseas – and they need housing.

But we’re only a small island, and a densely-populated one at that. Accommodation in general is scarce, with a housing shortfall of 1.8 million forecast by 2025.

A new breed of student

Students in the past were expected to put up with pretty basic halls of residence and later move out into a bedsit or a shared student house.

Today’s students have to pay significant tuition fees so they expect a lot more from their overall university experience – particularly their accommodation.

They demand a good balance of privacy and social living; that want first-rate onsite facilities and to be within easy reach of their campus and city centre; they need a comfortable room with all mod cons where they can enjoy as carefree a life as possible.

Yet according to HESA, only 26% of UK students have access to this type of accommodation.

CBRE report a year-on-year increase of 26,000 bedspaces in 2016, up by 12%; but the supply to demand ratio isn’t nationally consistent. They suggest that when 40% of a city’s students are in PBSA, that represents saturation.

A successful location strategy

Identifying a suitable location for development is a complex blend of factors which all have to come together in just the right way.

The host city needs to demonstrate a thriving local economy with evidence of substantial recent or proposed investment in civic revitalisation.

The university must be ambitious, ideally embarking on a programme of campus openings, extensions or upgrades; above all, it must be a popular choice with students.

There must be an appreciable undersupply of accommodation in the face of consistent demand; if the local authority is discouraging buy-to-let ownership through Article 4, that helps funnel the students to PBSA.

And of course, a prime site close to both campus and city centre must be found – affordably.

Yield is key

According to the report, student accommodation NET initial yields were 4.5% in Central London, 5.15% in superprime regions (like Oxbridge; historic and therefore restricted) 5.5% in prime regions and 7% in secondary regions.

An 8-10% NET yield fixed for 10 years would be well worth seeking out.

Choosing a property

Clearly a great deal of research and due diligence needs to take place before you can come to an informed investment decision.

Here at Emerging Property, we specialise in the UK’s highest yielding property sectors – PBSA and Serviced Apartments. We are the exclusive master agents for the UK’s only NHBC accredited student property developer.

Our aim is to provide you with an effortless income, which is why all our properties are run by an onsite management team. They take care of all operational aspects of the property, from vetting and letting to maintenance and repairs. Every quarter they will automatically pay your fixed income into the bank account of your choice.

As an Emerging Property owner, you will have no landlord responsibilities whatsoever. Fully flexible resale options allow you to sell on any time you choose.

We create detailed Investor Reports for each of our developments which contain every scrap of relevant information; they are available to download from our website.

We are happy to organise site visits so our prospective buyers can see exactly where the property is and what it’s like. The developers and management teams will be on hand to answer any questions they have.

2016 – a good year for us too

Traditional buy-to-let ownership has got a lot more difficult recently, with Stamp Duty surcharges on secondary properties along with Article 4 restrictions on house conversions.

None of our properties are affected by these measures, since they are classified as commercial property and therefore exempt from Stamp Duty below £150,000. They are also exempt from Capital Gains tax on resale.

With December’s figures yet to be finalised, we can already report our most successful year to date.

Property reservations are up 12% on 2015, and contract exchange has leapt by 49%.

We’re also pleased to have recently announced a brand new development of 300 student studios in Stoke-on-Trent, the initial phase of what will be a 1600-unit student village.

Feel free to have a chat with one of our consultants today; they know each development inside out and work to a strict no hard-sell policy.

They’ll be able to explain how one of the UK’s top performing property sectors can work for you.

Make 2017 the year you get in touch with us and share in the success of the Student Property sector.
Category: Medhead News

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