The growth and excellent yields available to investors make student accommodation one of the UK’s leading investment opportunities according to a new report.
The research, conducted by Mistoria Group, demonstrated that student property remains an excellent investment option, with larger market growth and rental yields being delivered to investors.
Student Property Investments
The recent surge in university applications, following the removal of the applications cap by the government, has led to a rapid increase in the demand for student accommodation as many universities struggle with a shortage.
Private developments, offering high quality student studio apartments and rooms have become a more significant part of the student property market, with students beginning to favour these developments over the traditional student ‘digs’. The shortage of university-provided accommodation, combined with the growing trend for high quality student developments has helped the student accommodation to continue its growth.
In particular, student properties in the North West have experienced a significant increase, with average rental yields reaching up to 13% over the first three quarters of 2014, substantially more than the UK average of 6.37% that was estimated at the start of this year and standing on average 5-6% higher than the UK’s buy-to-let market.
The strength of the yields and the rate of growth in the student market have led to the rate of investment in the sector dramatically increasing. According to the report, £2 billion was invested in student properties in 2013, demonstrating that investors are continuing to see the student accommodation market as an excellent source of investment.
UK Student Accommodation Investments in the North West
As student properties continue to be an excellent investment opportunity for investors, Principal International is delighted to offer a range of exceptional student property investments located in the fastest growing area in the UK: the North West.
Operational and fully tenanted, The Grand Mill in Bradford offers investors an immediate income of up to 8% NET yield for an investment of just £39,000. This fully managed property investment is located just 0.4 miles from the University of Bradford and Bradford College, making it ideally placed for students in the area.
For a higher yield, Holmes Street Burnley is an off-plan investment that will be completed in time for the start of the 2015/2016 academic year. This development offers investors 10% NET yield which is contractually guaranteed for 5 years, in addition to 5% interest accrued on deposit. This development will be fully managed and stands just 250m from the University College of Football Business, providing accommodation that perfect for those attending the institution.
Recent research by Mistoria Group, specialists in student property investment, has highlighted the speed of growth in the student property market. The findings of the research also underlined the high level of returns that student property currently tends to deliver, particularly in the North West.
The average rental yield for student properties across the UK this year was previously forecast at 6.37%. However, the report showed that in the North West of England’s student property sector across the first three quarters of this year, rental yields were significantly higher at 13%. Compared to the wider buy-to-let market in the UK at present, student property yields are around 5-6% higher. Between April and June this year, gross rental yields across the whole buy-to-let market showed levels of 6.2%
The report also showed significant growth in the sector, with 8% year-on-year increases for gross cash rental yields on student properties in the North West. Over the past five years, this represents a rise of 22%, making it one of the UK’s fastest-growing investment property markets over that period. It has also shown itself to be an exceptionally healthy market over recent years as a whole. Property values, as well as rental yields, have tended to either remain steady or increase over the past few years.
Mistoria Group managing director Mish Liyanage said that “Investing in student accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties than a comparable BTL property in the same city.”
A number of factors lie behind the healthy growth of the student property market. One of them is the demand pressure that comes from a rapidly-growing population of students in the UK. More and more domestic students are applying for university places, and the number of international students coming to the UK is also on the rise. This year, UCAS expect to see a record-breaking half a million applications. The number of university places on offer is also increasing. 2014 saw 30,000 extra places made available by UK institutions.
However, while once students were happy with just about any “digs” they could get their hands on, capturing a slice of today’s demand often requires some commitment to quality. According Mish Liyanage, “Students will pay more for high quality, well-maintained accommodation than for the traditional rundown and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation.” Liyanage went on to say that “Our recent research shows us that the vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills.”
It seems that investors are increasingly catching onto the opportunity that student property – once something of a niche investment type –can represent. £2 billion were invested in the sector last year, according to the Mistoria Group’s research, and the total volume of activity has risen significantly over the last couple of years.
We hope you are settling in and enjoying your new home.
We aim to ensure you are completely satisfied with everything that has been provided in your property. While we are confident that all of our properties are completed to the highest standard, it is understandable that in some cases there may be minor settling in issues.
If you do have any problems which we have still not addressed please contact one of the following members of staff:
The lettings team is made up of Senior Lettings Manager Mike Howard, Senior Lettings Administrator Pam Higham and our Lettings Assistant Kye Bennett.
You can contact any member of the lettings team for general lettings queries during office hours (9:00am-5:00pm, Mon-Fri) on 0161 707 6106 (option 1) or firstname.lastname@example.org, please also send all general maintenance issues through email. For any complaints please contact Mike Howard at the office or by email on email@example.com.
Emergency Maintenance – For out-of-hours (evenings and weekends) electrical, gas or plumbing faults, speak to Alex. 07794 913 390
Boardband Issues – All of our properties have a fast, reliable broadband connection. If you experience any problems, let April know so we can get you back online as soon as possible. firstname.lastname@example.org
Customer Service – We’re confident all complaints are handled in the correct manner but if you don’t feel this is the case please contact Louise. 07794 927 886 /email@example.com
Mistoria are specialist NW student letting agents. We have high quality student accommodation available in the major North West university cities of Liverpool, Preston and Salford. Contact us for more inforamtion or to arrange a viewing. Call 0800 500 3015 or email firstname.lastname@example.org.
We are now conducting viewings for the 2015/16 academic year.
Council bosses are considering new rules for landlords after a report highlighted that 85 per cent of private renters think that more should be done to improve living standards.
Camden Council’s report that was released last month found that tenants living in 8,585 HMOs in the area complained of black mould, defective toilets, faulty electric circuits posing electrocution risks, collapsed ceilings and dangerous sleeping quarters.
In the wake of the report finding that 85 per cent of private renters, including 9 of the 12 landlords who responded to the survey, stated more could be done to improve living standards, council bosses are now considering new rules.
These rules include requiring all landlords to apply for a licence before converting any property into a HMO, regardless of its size.
However, it was asked by The Mistoria Group if tougher legislation could actually improve living conditions.
Commenting on the development, Mish Liyanage, Managing Director of The Mistoria Group said: “Across the UK, properties are being converted into HMOs by predominantly professional property developers and investors. However, there are a few HMO landlords that are providing extremely poor and dangerous housing and not a week goes by, without a HMO landlord hitting the headlines.
“In fact, earlier this month a Croydon landlord and agent were fined £3,000 plus £2,500 in court costs, after being found guilty of running an unlicensed HMO, where seven people were rescued from a fire. They had failed to register the property, which had five paying tenants at the time of the fire.
“Some HMO landlords are also charging tenants excessive fees for non-specific administration including credit checks (which are often not carried out); the lease; inventory preparation; and finally, the check-out. Due to the supply and demand issues in some areas of the country, landlords can make extra, or inflated charges, because the tenants have no choice if they wish to rent a property. Students are particularly vulnerable to these bad practices, as they are usually first time renters and are unaware of correct procedures.
“It’s a sad fact that many tenants are getting a raw deal and the problem of rogue HMO landlords is getting worse, as demand for cheap rental property increases across the UK. The new trend of ‘Hutching Up’, which involves young people squeezing into smaller accommodation to meet soaring rental costs, is driving demand for more HMO properties.
“As a company that fervently believes in providing high quality accommodation, we believe further legislation is a good thing for raising the standards of HMO accommodation. We also think that landlords and agents who are accredited by their local council should receive a discount when they are applying for HMO and selective licenses.
“We strongly recommend that both landlords and students use a letting agency which has extensive experience in managing HMOs. This will ensure the properties are maintained as per the legal standards and safety of tenants is guaranteed. The real benefit from landlords is that they can avoid being prosecuted and fined up to £20,000.”
A property agency and management firm says there should be more stringent regulations governing homes in multiple occupation with an accreditation scheme for landlords which would entitle them to licensing fee reductions where appropriate.
Mish Liyanage, managing director of The Mistoria Group, says that currently landlords only need to apply for a HMO licence if they intend to convert their property into what he calls a ‘large HMO‘ – defined as a property with at least three storeys wand at least four tenants, all of whom each share toilets, bathroom or kitchen facilities with other tenants.
Such HMOs also require annual certificates for emergency lights, inter locked smoke alarm, along with gas and PAT testing and if applicable, electrical and gas certificates.
However, Liyanage says the new trend of ‘Hutching Up’, which involves young people squeezing into smaller accommodation to meet soaring rental costs, is driving demand for more HMO properties.
“As a company that fervently believes in providing high quality accommodation, we believe further legislation is a good thing for raising the standards of HMO accommodation. We also think that landlords and agents who are accredited by their local council should receive a discount when they are applying for HMO and selective licences” he says.
“Some HMO landlords are also charging tenants excessive fees for non-specific administration including credit checks (which are often not carried out), the lease, inventory preparation and check-out. Due to the supply and demand issues in some areas landlords can make extra, or inflated charges because the tenants have no choice if they wish to rent” claims Liyanage, who says students are particularly vulnerable.
New research, carried out by student property investment specialists The Mistoria Group, has shown that the average gross cash rental yields for the student property sector in the North West were 13% for the first three quarters of 2014. This was significantly more than the 6.37% forecast for average student property yields across the UK for 2014.
The findings also revealed that the gross cash rental yields for student property in the North West increased by 8% year on year, representing a 22% rise over the last five years. Moreover, the yields are 5-6% higher on average than the buy-to-let market as a whole, which stood at 6.2% between April and June 2014.
For the past five years, student accommodation has been the biggest growing investment property market in the UK, according to The Mistoria Group. It has also continued to be one of the most robust investment sectors, with rental incomes and property values either remaining stable or increasing.
“An alternative investment to the UK’s more traditional property markets, student accommodation offers investors strong returns and this sector is continuing to see phenomenal growth,” Mish Liyanage, Managing Director of The Mistoria Group, said. “Investing in student accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties than a comparable BTL property in the same city.”
The domestic student population continues to escalate, with an extra 30,000 university places offered in 2014. UCAS are expecting an all-time high of 500,000 applications this year.
“Students will pay more for high quality, well-maintained accommodation than for the traditional rundown and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation,” Liyanage added. “Our recent research shows us that the vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills.”
He concluded: “Student housing is increasingly a global asset class. Over the last two years, there has been a huge surge in student housing investment activity. Last year saw over £2 billion worth of investment in the student sector.”
Mistoria offer investors HMOs, based in the North West, which they say give cash returns of 8%-10% net per annum, from day one. Also the geared yields should be as high as 35%. By contrast, Liyanage argues, PBSA yields are usually guaranteed by the developer for the first 5 years and these figures are “subject to speculation about rental increases in the coming years, which may, or may not occur.” If the property does not perform as the developer predicts, “the investor is left with an underperforming asset in year six.”
Due to the large number of North West student houses Mistoria manages, we are already receiving a significant number of enquiries for the 2015/2016 academic year.
As we value our current tenants (you guys), we wish to give you the opportunity to renew your lease and book the property for 2015/16 before we offer the property on the open market and commence with the viewings.
Will you please confirm, via email, your intentions for the property (one email from the lead tenant per property will be fine) so we can establish the our availability for the next academic year.
We ask that you confirm your intentions by 27th October as there are many prospective tenants who wish to arrange viewings and finalise their accommodation prior to Christmas.
Unfortunately we did have several disappointed tenants last year as they failed to reply to our email and the property was let prior to them responding.
We look forward to hearing from you and having you as tenants for the next academic year.
With interest rates at an all time low, one would not expect there to be issues with lenders charging high fees/rates for landlords who are in a position to borrow for property investment.
However there has been a sharp rise in the number of formal complaints from landlords and investors about the valuation they have received for the HMO’s (both licensed and non-licensed), according to The Mistoria Group, a leading student property investment company.
These complaints tended to centre around the valuers property valuation. Very often it seems the valuation provided was up to £50k below market value and didn’t take into account rental income – meaning the level of lending was heavily restricted. Valuers tended to give a property a valuation based on sales comparison on the same road or based upon rental income if the property were let to a family unit rather than on a room by room basis (which is of course substantially lower).
Mish Liyanage, MD of The Mistoria Group, comments, “This is a big problem in the market place and it needs to be addressed.” While there are appeals processes and complaints to be made, they often yield little success. “The comparisons we have provided for like for like HMO’s are often totally ignored.”
A recent case involved a valuer who was asked to value a four bed house share. The HMO valuation was £80k and it failed to take into account any HMO comparisons, which were provided. These included four bed HMO’s in the area that sold for £130k within the past 12 months. The valuation cost £700.”
Unfortunately for landlords they are in a very weak position when it comes to arguing against valuations. The lender will be using a third party surveyor whom they are most likely to side with. The complaints procedure is likely to be a drawn out affair and the landlord is very likely to be a long way down the conveyancing line so that by pulling out not only would they be losing the (hefty) valuation fee, but will need to start the process again with a new lender.
This is where a good mortgage broker can come in very useful as they will often have good contacts from within the lenders who may be able to shed light on matters and expedite the process.
This article was first posted on ctp:property on 12th October 2014
British Gas and Shelter have found that 1 in 10 landlords are unable to confirm that their tenants are living in gas safe properties.
Landlords have a legal obligation to have their accommodation inspected for gas safety yearly however only 14% of landlords admitted to being aware of these regulations. Failing to meet this requirement can lead to large fines and even imprisonment. After each inspection landlords receive a gas and safety check certificate. Despite this research found that 10% of landlords who took part in the study were unable to confirm that they had the certificate.
Worrying statistics like this mean that a large number of tenants aren’t living in secure accommodation and are at risk of carbon monoxide poisoning.
British Gas engineer Ben Whitehouse gave tenants a warning, “Carbon monoxide is a silent killer and can leak from a range of household appliances. That’s why it’s so important to fit a carbon monoxide alarm.”
We know it’s more tempting to look for a better deal on rent rather than the important safety checks but when looking at homes for the next academic year it is important to enquire about the safety of a property and how general upkeep will be managed during your rental contract.
As a tenant you have a right to a copy of the gas safety certificate. Asking other questions about smoke alarms and safe routes for evacuating in the case of a fire will also allow you to suss out how safety cautious your landlord is.
Don’t be afraid to ask questions. Knowing that your home for the academic year is secure will give both you and your family peace of mind. If your landlord is compliant with regulations then they will be happy to show you the appropriate documentation and if they can’t you should probably look somewhere else!
Mistoria Estate Agents are a lettings company that specialise in student lets. We work on behalf of the property owner and provide our tenants with all of the relevant safety documents. We have policies in place that protect our clients and inspections are carried out regularly to ensure we are providing a safe living environment.
Mistoria Estate Agents provide high quality lettings around in the main university cities of Salford, Liverpool and Preston. If you are interested in safe and affordable North West accommodation for students please contact us by calling 0161 707 6106 we will be happy to answer any of your queries.
The average gross cash rental yields for the student property sector in the North West were 13% for the first three quarters of 2014, well ahead of the 6.37%* forecast for average student property yields across the UK, for this year.
The research, conducted by The Mistoria Group, also reveals that the gross cash rental yields for student property in the North West rose 8% year on year, and are up 22% over the last five years. What’s more, the yields are 5-6 per cent higher on average than the buy-to-let market as a whole, which stood at 6.2%* between April and June 2014. (*Source: BM Solutions).
According to The Mistoria Group, for the past five years student accommodation has been the strongest growing investment property market in the UK, and has continued to be one of the most resilient investment sectors, with rental incomes and property values have remained stable or have increased.
Mish Liyanage, Managing Director of The Mistoria Group comments: “An alternative investment to the UK’s more traditional property markets, student accommodation offers investors strong returns and this sector is continuing to see phenomenal growth. The domestic student population continues to grow with an extra 30,000 university places offered in 2014, and UCAS have reported they are expecting an all-time high of 500,000 applications this year.
Investing in student accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties, than a comparable BTL property in the same city.
Students will pay more for high quality, well-maintained accommodation than for the traditional run down and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation, making the better quality properties highly sought after. Our recent research shows us that the vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills.
At Mistoria, we offer investors HMOs, located in the North West, which give cash rental returns of 8%-10% net per annum, from day one (this is not a projection). Also the geared yields should be high as 35%. In contrast, PBSA yields are traditionally guaranteed by the developer for the first 5 years and these figures are subject to speculation about rental increases in the coming years, which may, or may not occur. If the property does not perform as the developer predicts, the investor is left with an underperforming asset in year six.
Student housing is increasingly a global asset class. Over the last two years, there has been a huge surge in student housing investment activity and investment in student accommodation is certainly big business in the UK right now. Last year saw over £2 billion of investment in the student sector.”
Retiree, Joy Townley from Calne, Wiltshire recently bought two investment properties in Salford through The Mistoria Group:
She said: “I decided that property was the right choice for me because of the current low interest rates and I wanted a better return on my capital. I live in the South West of England where property is extremely expensive. Buying investment property in this part of the country was out of the question and the North West is a growing market. The numbers just added up and I am enjoying s consistent income stream. I’ll be keeping hold of the properties for the long term.”
Investors who are thinking of buying student property should conduct thorough research before making a purchase. Mistoria has put together some tips on investing in student property:
• HMO versus student pods: Think carefully about the property you want to buy eg HMO or a student pod. Most student pods are sold ‘off plan’ – which means before they are complete, and in many cases before construction has even started – and come fully managed. This means you could expose yourself to risk on two fronts – ‘development risk’ and ‘management risk’. For example, the development may not be finished, or the developer may not have the skill or experience to manage the development and if they do, how much will they charge for their services?
• Mortgages: If you need to secure a mortgage to purchase a student property, this will be a lot easier for a HMO, as you will be able to go through traditional buy-to-let providers and will have access to the leading buy-to-let rates. Also, if you are building a portfolio, you can borrow on your equity in the HMO to fund further investments. With student pods, there is no established resale market, and due to the nature of this investment finance is very hard to find.
• Rent guarantees: Beware of ‘rental guarantees’ offered by developers. This can often be an overstatement. The guaranteed rents are attractive to investors, but often they fail to materialise. Investors are actually subsidising the guaranteed rent by paying an inflated price for the unit they secure. There have been a number of student pod schemes that have stopped paying out the guaranteed rents soon after completion and investors have then discovered that the real market rate for the rents is much lower, reducing their yield. They have been left with an underperforming asset, that is difficult if not impossible to sell at an acceptable asking price to the investor.
• The exit strategy: With a normal buy-to-let, you can sell the property at any time on the open market, through a reputable estate agent and expect a reasonable capital appreciation. However, selling a student pod will encounter problems. For example, who decides the market value? As a piece of real estate per sqm it is very expensive (double the average market value), there is no established resale market. Who will sell it? Is it an investment, or is it a piece of real estate?