Continuing his weekly series of interviews with senior figures in the UK housing industry, Marc Da Silva poses the questions to Giles Beswick, director of Select Property Group, a global provider of fully managed property investment brands including Vita Student, about the burgeoning student accommodation investment market.
Why are a growing number of people choosing to invest in the student property market?
A growing number of investors are selecting student accommodation due to the huge changes in the variety and quality of property being developed. Gone are the days of rundown halls of residence and grotty student houses being seen as a rite of passage. Students now have higher expectations and much more variety available to them.
Because of this, purpose-built student accommodation (PBSA) has now become the top-performing property investment class in the UK with the industry worth £200bn globally.
Should more consider investing in this sector of the market?
Britain is the world’s second most popular destination for international students, offering great opportunities for investors and making student accommodation a highly attractive proposition.
It is clear that student accommodation is exciting investors. Over £4.2bn has been invested into the sector in the first six months of 2015, culminating when frenzied investor appetite saw £670m worth of deals being agreed in a single day.
What sort of investment returns should investors expect to receive from purpose-built student accommodation?
A lot of purpose-built student accommodation providers offer attention-grabbing yields, but if they are not managing the whole process, from development through to letting and management, they can’t fully oversee and control the lifecycle of the asset and assure the yield in the long term. There are a lot of providers offering student accommodation, but investors need to look at who is doing it differently, who is popular with students and who gets 100% occupancy as that is what delivers high returning yields.
Taking our Vita Student product as an example, as with all our portfolio, we develop, sell and manage every aspect of the building and offer experience-led accommodation for students, treating them like customers.
We cater specifically for the end user and offer exceptional service, creating an unmatched living experience which is why we can boast 100% occupancy at all of our sites and why we were named Residence of the Year by Manchester University students for our First Street residence.
Our customers matter, they love staying with us and in turn this means we can typically offer between 7-9% gross rental yield to individual investors, with a lot of our portfolio outperforming this figure.
Is it best to self-manage a student property or call in the professionals to do it?
For traditional buy-to-let landlords, the management itself of student property can often be time intensive. Midnight calls about broken boilers or dealing with unpaid rent becomes a full-time job, and even if the property management is outsourced, the fees and associated costs incurred make the process less desirable.
With purpose-built student accommodation a high-performing investment asset, a better option would be to find a fully managed solution, inclusive of costs that offers a transparent and strong rental yield.
Will the impending interest rate rise affect the student property buy-to-let market?
It’s something that UK property investors haven’t had to worry about for eight years but it would appear that interest rates in Britain are on the verge of rising for the first time since 2007. It’s an event which is historically met with some degree of trepidation, as those with mortgages begin to calculate the impact an increase in the base rate could have on their outgoings.
However, there is one property type that will be largely resistant to fluctuations in the base rate. The purpose-built student accommodation sector is strong, stable and in demand.
Interestingly, throughout each year of the economic downturn, it was the only property type with which investors saw consecutive increases in annual returns, as a market that’s largely resistant to external economic factors.
What are the golden rules to investing in student property?
When looking at investments in the student accommodation market investors need to remember the golden rule of location, location, location.
Location will offer both flexibility and longevity; ensuring it’s a space that will create an environment to be repeatedly let or eventually sell on. Ask yourself; is it a place where students want to live? Are the needs of students catered for? Is it near to campus? Is it close to public transport? Is the area safe?
The credibility of the developer and the clarity of who’ll be managing the property is also a key factor to consider as is transparency of income and expenditure. Make sure everything is clear from the start and you understand the payment process so you can see clearly how your investment is working for you.