Investing in student housing – the hot spots
I thought I would share this useful article, especially if your a Landlord who invests in student property in Bristol. It
makes for an interesting read. As a Bristol letting agent, I am somewhat surprised that Bristol does not appear in the list for property investment in student lets. As a letting agent with over a decade of experience letting properties to students, I know that whilst Bristol has not seen a dramatic drop off in the price of properties, there are still some deals to be made in lucrative and popular parts of Bristol which students like to live, these properties offer good longterm growth, for the Landlord into long term investment.
Where to Invest in student housing
This year’s A Level grades are out and, despite the joy for those who have places, the next challenge is on: finding accommodation. Most students will spend their first year on campus in Halls of Residence but for the second year students will move on to private accommodation and, says estate agents Savills, there was only one new bed created for every eight new students in 2009. So the opportunities for investors are clear.
In depth analysis
The graphs below show market information about properties in the key student areas of the UK and provide a comparative snapshot of the financial differences in investing in them. We have excluded London because it doesn’t have specific student residential areas. We have also excluded Oxford and Cambridge as most students stay in halls of residence for the duration.
Our analysis focuses on property ‘yield’ (annual gross rental income divided by the average property cost) and, to exclude the effects of market volatility, we have provided property asking prices at a 3 year average from August 2008 to mid 2010.
The data: rental return verses initial cost
The graph below (Figure 1) shows the Property Price and Rental Yield for the main student cities in the UK, with the data relating specifically to the student hotspots of each University City.
All Rental Yields range from between four and six per cent a year. Edinburgh and Brighton have the most expensive properties, resulting in lower yields. The rental yield in Leeds is impacted by its lower rental income. The good performers in the lower price bracket are Cardiff, Newcastle and Southampton which have a better average price and good rental yields.
The ups and downs
As well as rental return, also consider capital gain (or loss) on a property. The chart below (Figure 2) compares the capital appreciation / depreciation against the annual average yield of the selected areas.
The purple lines in the chart above show the ‘net yield’ (rental yield plus capital appreciated) for properties in each of the city’s student areas. The market has been volatile over recent years so the aggregated yield is sensitive to capital appreciation, as proved in Edinburgh, Birmingham and Manchester where price drops have resulted in negative net yields over the three years. However, past performance is no indication of future growth so investors should think about potential price drops and how long they will keep a property for and watch the markets closely. The better investments are in Brighton, Glasgow and Southampton, which show double digit net yields.
So where should I look to Invest?
Unfortunately, the difference between the property price and rental income in Edinburgh means it has seen a negative net yield over the past three years but, if you are looking to invest in Scotland, Glasgow is looking healthier with a ten per cent net yield. There is no shortage of students seeking accommodation here with three Universities in the city. and Scottish degrees tend to be four years long, giving potentially an extra year of uninterrupted income. Other areas showing promising Net Yields are Sheffield (also home to two Universities), Nottingham, Southampton and Brighton, offering a range of sound student property investment locations across the UK.
Appendix: ‘Student Ville’
The table below shows the key student accommodation areas in the main UK cities, including current average asking prices.
Information kindly supplied by Globrix.com
