Here’s something surprising – how has UK Student property been impacted by the BREXIT vote?

Rather than damage performance, as many analysts had forecast, the Brexit vote intensified activity in the UK student property market and demonstrated the resilience of the sector.

A recent report by Savills also highlighted how the demand for student housing in the UK has outgrown supply. Analysts believe that the market will continue to be driven by bulk purchases, as investors seek to shore up their positions and acquire additional scale.

Appealing to the Far East

The UK’s student property market has become a global asset class, attracting billions in investment from some of the world’s richest individuals and sovereign wealth funds. Demand is so strong that it was standing-room only for some prospective buyers at a recent investment conference in London. One of the biggest overseas investors is Singapore-based fund Mapletree, which acquired over 6,000 beds last year.

In recent comments, Hiew Yoon Khong, Chief Executive of Mapletree provided insight as to why the asset class holds such appeal to overseas investors, telling reporters: “Student accommodation is a big business and relatively low risk.” According to Savills, the second largest source of capital into UK student housing in 2016 came from North America, with over £1.3bn worth of investment. The bulk of which came from two Canadian investors: Brookfield SRE and CPPIB.

Rising standards

As the student buy to let property market has grown exponentially, so the quality of the accommodation has risen. Nowadays student rooms are more akin to corporate apartments, with communal facilities to match. A key part of our portfolio at HighGround is One Islington Plaza in Liverpool, where flat-screen TVs and high-speed broadband come as standard in the rooms. A cinema room, gymnasium and games room provide students the chance to relax away from their studies, reflecting new standards that many now demand. Research from Knight Frank shows that over one-fifth of students are willing to pay more than £160 per week for the right facilities. New possibilities are being created within the market, as developers compete for the attention of an increasingly discerning client base. Overseas students, attracted by a more lifestyle-oriented academic environment, are a big part of the equation.

Appealing to students means appealing to buy to let investors, who will in turn enjoy greater rental returns, and a UK student property market that has demonstrated it can weather the toughest of times.

See more about UK Student Property :

Rather than damage performance, as many analysts had forecast, the Brexit vote intensified activity in the UK student property market and demonstrated the resilience of the sector.

A recent report by Savills also highlighted how the demand for student housing in the UK has outgrown supply. Analysts believe that the market will continue to be driven by bulk purchases, as investors seek to shore up their positions and acquire additional scale.

Appealing to the Far East

The UK’s student property market has become a global asset class, attracting billions in investment from some of the world’s richest individuals and sovereign wealth funds. Demand is so strong that it was standing-room only for some prospective buyers at a recent investment conference in London. One of the biggest overseas investors is Singapore-based fund Mapletree, which acquired over 6,000 beds last year.

In recent comments, Hiew Yoon Khong, Chief Executive of Mapletree provided insight as to why the asset class holds such appeal to overseas investors, telling reporters: “Student accommodation is a big business and relatively low risk.” According to Savills, the second largest source of capital into UK student housing in 2016 came from North America, with over £1.3bn worth of investment. The bulk of which came from two Canadian investors: Brookfield SRE and CPPIB.

Rising standards

As the student buy to let property market has grown exponentially, so the quality of the accommodation has risen. Nowadays student rooms are more akin to corporate apartments, with communal facilities to match. A key part of our portfolio at HighGround is Natex in Liverpool, where flat-screen TVs and high-speed broadband come as standard in the rooms. A cinema room, gymnasium and games room provide students the chance to relax away from their studies, reflecting new standards that many now demand. Research from Knight Frank shows that over one-fifth of students are willing to pay more than £160 per week for the right facilities. New possibilities are being created within the market, as developers compete for the attention of an increasingly discerning client base. Overseas students, attracted by a more lifestyle-oriented academic environment, are a big part of the equation.

Appealing to students means appealing to buy to let investors, who will in turn enjoy greater rental returns, and a UK student property market that has demonstrated it can weather the toughest of times.

See more about UK Student Property :

How to Succeed with Student property – Tip 3 : The subtle art of comparison !

They say that size isn’t everything , but for investors when it comes to student rental income it’s usually at the top of every list. But how can you confidently predict what that income will be from what is currently still a construction site? Fortunately help is at hand…

The vast majority of PBSA on the market are offered to investors “off-plan” which means agreeing to purchase a property before its built and therefore before it has a track record of being a successful student development. The rewards for this include relatively low purchase costs and usually a good selection of student rooms to choose from .. off the plan.

But without a proven income from the development, how can you be satisfied that your investment is going to give you the income you expect and have been “promised” by your sales agent?

The answer as usual is to do your own homework but seeking out the closest established student halls, closest in a number of ways. When choosing your comparisons, consider:

  • Location – proximity to the development you’re considering
  • Age and design
  • Target audience (Undergraduate, overseas, postgraduate)

Often the developer will provide you with a set of income projections. That’s fine, but scrutinise these for accuracy. Ask yourself:

  • Are these sufficiently detailed – is there a spreadsheet breakdown of costs and rental income, or just headline figures with little or no justification?
  • Do these figures come with citations or references to justify them?
  • Can the figures be easily verified?

The more data the developer or agent provides you on request the better: it shows there confidence in their development and their commitment to you as a serious investor.

Where this isn’t immediately to hand, all is not lost. Comparative data can be obtained by desktop searches, speaking to university accommodation offices and speaking to the student management company that has (hopefully) already been signed up to run the development.

Armed with this data and some nifty spreadsheet work it’s then much easier to make your own realistic projections on income and see how this squares with the developers’ own.

When HighGround looks for a suitable student hall to offer our investors, we carry this out as a matter of course, regardless of the volume of figures given to us by the developer. We insist on independently checking every assumption to our total satisfaction before we offer it to our investors.

If it doesn’t stack, we reject the development. But hey that’s just us.

Find out more about why UK student rooms remain so popular with investors. Here is a great introduction, backed up by some solid facts and figures. Download our Student Property Guide today:

How to succeed with Student Property – Tip 2 : Look Beyond the Headlines

Welcome to our second post with tips on what to do when considering purpose-built student property investments.

You’ve likely heard the phrase “if it seems too good to be true, it probably is”, right ? (I could spend a whole book chapter unpacking that piece of received wisdom, in fact I shall do soon – it’s fascinating !).

Being objective

But objective investment research requires put aside the scepticism as well as any giddy excitement. It’s a stoic activity, but one we all find difficult to some extent, as most buying decisions involve emotion at some level !

When it comes to a passive investment such as buying a student room in Purpose-built Student Accommodation (or PBSA for short), one should approach the claims of the property developer or agent with a curious mind.

Here’s an example: “Fixed returns of 6% for 5 years”. These terms are often offered by the developer as an incentive to buy the student rooms. This is a reasonable idea as it provides some comfort for the buyer whilst the student hall ramps up to speed in the first few years of operation.

That said, these offers are largely irrelevant for well-run new halls, as good student facilities companies of halls built in the right location should enjoy full occupancy at market rent from opening. It can however, mask problems with poor location and bad management

So, as an intelligent investor, here are some key questions to ask yourself:

  1. is the student hall in the right town or city, and the right location?
  2. is the student demand there? – some good signs are: investment being made into university facilities and infrastructure; an excess of private student houses of multiple occupation; strong postgraduate programme; growth in local student numbers over the last 5 years.
  3. looking at similar private or university-run halls in the area, do the rents match the estimates provided by the developer’s estate agent to the investor? Get out the spreadsheet – real numbers reveal the true story!
  4. does the company set to manage the hall have a strong, long track record of experience with running student halls and advertising them to students to drive the best rents and highest occupancies.

Intelligent investment involves looking beyond the juicy headline figures, being neither carried away by them nor dismissing them out of hand.

Black and white or shades of colour?

Investment due diligence seeks to simply get to the truth and make an informed decision. It’s harder work than just accepting or rejecting the headline figures, but ultimately far more helpful.

At HighGround Property, we operate unusually detailed due diligence on every student hall investment we consider and, as a result tend to reject around 80% of all investments that appear on our desk. Only those that pass our exacting standards are one’s you’ll see from us.

Discover more about the world of student property with our Expert Guide. Click now.