Prelude: South Africans may be feeling like they have received a 13th paycheck. The positive vibe created with the nomination of Ramaphosa has sent positive vibes across the country. The value has been buoyed by the potential turnaround and end to the corruptions scandals which has dominated the headlines recently. With corporate scandals such as Steinhoff’s sending jitters amongst share investors, perhaps it is time to consider other options.
Does the UK student property market still offer attractive opportunities in 2018?
The outlook for UK student property market remains positive. There still appears to be strong demand from institutional buyers for UK student property. Recently listed company Watkins Jones, has had a fifty-nine percent share price increase over the past year. The company obtains planning and builds student property developments which it forward sells to institutional investors. The pipeline of “10 student accommodation developments scheduled for delivery this year (2018) have been forward sold, as have 85 per cent of the targeted beds for the 2019 financial year”. According to the Investors Chronicle.
The demand for student property has been unaffected by Brexit. The marginal reduction in EU student applications was more than offset by the increase in student applications from other countries such as Singapore, China and Hong Kong. Resulting in a net 4% increase in student numbers in 2017 according to HESA.
South African investors do not have to invest in shares or a student fund. Investors can purchase studios in purpose built student property development. The studios typically cost R1.36 million rand, with the more affordable student en-suite rooms (pods) priced just under ZAR 1million. The typical net income ranges between seven to eight percent (7%-8%) after full management and ancillary costs have been deducted.
For those worried about the sustainability of the UK student sector; they can draw upon the analysis provided by global real estate consultancies such as Savills in depth reports on the student market. The end of the year (2017) table revealed that Bristol, Leeds and Nottingham ranked in the top two tiers for student property.
“Purpose built student properties are blocks of apartments consisting of studios or cluster flats which are built with large communal areas, close to universities and have planning permission only for student usage”
The report measures a number of factors including
Current availability of purpose-built student properties as well as the pipeline of future developments balanced against the student demand and university rankings.
Bristol entices young people due to its high ranking educational facilities (University of Bristol is ranked in the top ten in the UK), and trendy arts scene. It has also experienced significant investment over the years such as the Bristol Temple Quarter Enterprise Zone, and as a result has a lower rate of unemployment than any other UK city. These factors likely appeal to prospective students who wish to remain in the city after graduation.
Lower Ashley Road is a three-storey 78-unit development based just north-east of Bristol’s city-centre. Its location means that it is convenient for students who attend either the University of Bristol, or the University of the West of England (UWE), both of which are reachable either on foot or via direct public transport links.
Collectively, the universities have over 51,000 full time students enrolled in various degree programmes, yet can only provide accommodation for 7,000 of them. This means that there is a reliance on independent student developments, such as Lower Ashley Road, to accommodate the remaining students. The demand is so high, that the developer is assured the units will remain tenanted and is guaranteeing an 8% net return for three years.
The Clifton Suspension Bridge, spanning the picturesque Avon Gorge, is the symbol of the city of Bristol.
Home to over 70,000 students, Nottingham has one of the largest student populations of any city in the United Kingdom. It is ideally located in the middle of England, and its strong transport links makes it easily accessible from most other parts of the United Kingdom.
It boasts a £12bn economy, making it the economic capital of the East Midlands and £1bn has just been invested in transport links and infrastructure.
Article 4 direction has been adopted in Nottingham for the past six years. Article 4 direction prevents family homes being converted to houses of multiple occupation. Thereby restricting the supply of student housing. Where demand has continued to grow, prices have continued on an upward trajectory much to the delight of Nottingham landlords. Overseas investors can also benefit from the undersupply by acquiring a student apartment investment in Laceworks, Nottingham . The peace of mind comes from eth knowledge that it is fully managed by a company called SFM student who have a 100% track record across their portfolio.
Leeds is ranked in the top tier for student property demand. The vibrant city attracts a cosmopolitan crowd and has been in ranked in the top 5 universities for media and communication studies since 2014.
Leeds has one of the most diverse economy of the all the UK’s main employment centres. In 2016, Leeds saw the fastest rate of private sector jobs growth of any UK city and has the highest ratio of public to private sector jobs of all the UK’s Core Cities.
Marks and Spencer’s was founded in Leeds. Back in 1884, Michael Marks opened up his penny bazaar stall in Leeds Market before enlisting the help of Tom Spencer a decade later. Soon after, they moved to a permanent spot just around the corner and the rest, as they say, is history.
Students staying at Trinity Hall can visit that very same market today. Trinity Hall was built for students in 2015 and has a proven income stream for the past two years. Investors seeking immediate income of R125,350 could purchase a resale student property in Leeds through One Touch Property.
Their investment consultants will be in South Africa between the 7th to 18th of February (2018) for one-to-one investment consultations with motivated buyers looking to take advantage of the strong rand.
Contact them now 010 300 1200 (JHB)