Britain's real estate bargains
British property prices have dropped - but flats for less than GBP50,000 (HK$630,000)? That's the bargain basement entry level for student accommodation in regional cities such as Liverpool and Manchester.
With annual returns of up to 10 per cent, it's no wonder so many Hong Kong and mainland investors are beating a path to developers' doors.
According to the Knight Frank Student Property Report - the only investment index tracking performance of this specialist asset class - regional student housing is Britain's best-performing investment sector. Regional cities recorded total returns of 14.6 per cent, income and capital values, in the year to December, as against London's 8.4 per cent.
Average rents in regional cities' student accommodation rose 4.1 per cent over the period, while London fell 3.6 per cent.
James Pullan, Knight Frank's head of student property, indicates even stronger returns ahead.
'There have been record applications for university places this year, but students will find there is an undersupply of accommodation to meet their needs. The student accommodation sector is now recognised as forming a critical component of a balanced investment portfolio.'
Ray Withers, director of property investment agency Property Frontiers, which has successfully marketed numerous student accommodation projects in Liverpool, agrees that student accommodation yields do vary geographically.
'In Liverpool, home to three of the country's leading universities and some 53,000 students, rents in the last academic year increased by 13 per cent, vastly exceeding the average 5 per cent growth per annum seen nationally in the six years to 2008/9.'
Withers adds that with Liverpool's universities expecting to attract high numbers of applicants for the next academic year, many from overseas, the city 'presents strong demand for student accommodation and in turn an attractive opportunity for buy-to-let investors.'
Government reforms in university funding and student finance, effective from the third quarter of next year, are also expected to change the landscape of higher education in Britain and, as a natural extension, put pressure on student housing stock.
According to data from the Universities and Colleges Admissions Service, demand for academic courses is at an all-time high, with nearly 700,000 university applications this year, some 210,000 more than the undergraduate places available with a 'significant' rise in demand from the European Union, Far East and Hong Kong.
Supply of new student accommodation remains limited with the vast majority not having access to private rooms. This leaves a discrepancy between supply and demand for the kind of accommodation Pullan says is 'at the heart of the student market's appeal'.
Today's student population expects location, facilities and privacy. For investors, Knight Frank suggests the top 10 locations to invest include Kingston, Brighton and Durham in England, and Edinburgh in Scotland.
The student vote goes to Newcastle, named by 64 per cent of 46,000 students surveyed by accommodationforstudents.com, Britain's top student accommodation website, as the best place to study, followed jointly by Liverpool and Manchester, each with 62 per cent.
Students were asked to rank the location of their university based on five criteria - shops (supermarkets, corner shops, book shops and video shops), facilities (gyms, libraries and parks), transport links (buses, trams, trains and underground), going out (restaurants, pubs and clubs) and community (safety, student population and surroundings).
Among its listings, Property Frontiers says Hatton Garden, Liverpool, meets all key criteria being located in the heart of city, only minutes from John Moores University, Lime Street station and all the shops, restaurants and nightlife. The 98 private en-suite student rooms with flat screen televisions and internet connection are more spacious than others in the city, housed within a refurbished early 19th century building.
On-site facilities will include ample kitchen space, communal lounges with televisions on each floor, an on-site gymnasium, computer/media service centre, management office and laundry facilities.
Rooms are available at GBP48,000. Ray Withers says investors can expect double-digit returns of 10.03 per cent net, the first year assured.
Property Frontiers has an equivalent quality and similarly priced property, St Andrews Place, offering 100 en-suite rooms in an historic 19th-century listed building in a city-centre location.
Withers calls this a 'remarkable new UK buy to let investment'. 'We are still seeing an undersupply of purpose-built, quality student accommodation in the city of Liverpool, highlighted by the fact that our partners remain confident of maintaining their track record of 100 per cent occupancy and delivering excellent rental income from September next year.'