It is not surprising that investors are hesitant about purchasing student property in Liverpool. Savills recently reported that the city had weak development prospects as the construction of student beds far outstripped the increase in the number of students. It dropped down in the Student Housing Development League Table to a “pass”, indicating a poor potential for high yields and low competition.
There are many new student developments under construction. Around Lime Street Unite are building an enormous development that when completed in 2020, will accommodate over 1,000 students. Meanwhile just down the road, Ion is undertaking a redevelopment of an 11-storey building that will complete shortly. Unite are also building a 776-bed St Luke’s scheme under the Bombed Out Church. In the past three years over 5,800 bed spaces have been created in Liverpool.
There is also a lot of existing student accommodation stock in Liverpool. In 2017 according to Savills’ Student Spotlight report, there were 21,700 existing PBSA units in the city which equates to 2.1 students per unit. With additional units either under construction or granted planning permission, this ratio is set to reduce to 1.4 students per unit. This will have potentially damning effects on any potential rental growth as competition is reduced.
It is understandable that the increased supply vs demand could stunt rental growth as there is reduced competition. However, that is to assume that the existing student accommodation stock in Liverpool will still be fit for purpose – which is not always the case. For example, Worthington Group announced earlier this year that it was going to convert North Western Hall on Lime Street back into a hotel due to the significant changes it would have to undergo to bring it up to the standard of new student accommodation offerings in the city.
There is also the case that the existing student accommodation stock is often located on the periphery of the city, and not in the centre or close to university campuses. Liverpool’s city centre population has doubled in the last decade, proving that there is an appetite for living centrally. As people become more discerning in terms of their accommodation choices, they are starting to appreciate the convenience of having restaurants and bars as well as their workplace or university campus on their doorstep. Three quarters of Liverpool’s city centre dwellers are aged between 17-29, providing a strong indication that many are either students or young professionals as when they grow older and start families they tend to move to the suburbs where they can have more space.
Between 2015 and 2016, the number of students in Liverpool increased from 50,000 to 60,000 and that number will continue to soar. Universities in Liverpool only provide beds for around 16% of their students, so there are clearly many students in Liverpool requiring quality accommodation. Not only that, but with the increased tendency to choose central locations, city centre properties are predicted to perform better than HMOs in the suburbs.
Such is the popularity of boutique student dwellings in city-centre, such as Sir Thomas are already fully tenanted for the student intake of 2018/19, as is X1 Arndale House. Comparable accommodation options with Liberty Living (Prospect Point) and Unite (Grand Central) are older builds with fewer amenities yet are priced similarly to studios at Sir Thomas. Cheaper options are also available in the form of shared houses, but they often lack basic amenities such as laundry facilities and internet connections which makes them less attractive, and bills are often not included in the weekly rent.
Another option that is on course for the 2018/19 student intake is Granite House on Stanley Street. Occupying a central L1 postcode, Granite House is perfectly located for students who are enrolled with the University of Liverpool or Liverpool John Moores University. Situated in the city centre, it is close to bars, restaurants, clubs and shops. It is close to Liverpool John Moores University’s James Parsons Building, Tom Reilly Building and Max Perutz Building. It is also just a 10-minute walk to the new Copperas Hill Campus, the £100 million invested by Liverpool John Moores University that will create a significant floor space of 355,000 sq.ft. that will home the Students Union and will also include the University’s three libraries, a variety of lecture theatres (teaching spaces, seminar rooms and IT suites) and state-of- the-art sports facilities will include an eight-court sports hall, a gym and multi-use studios. This certainly would keep the facilities of Liverpool universities competitive on the global stage and ensure the long-term appeal.
International students tend to prefer larger studios such as those located at Granite House which average 25m² and have floor to ceiling windows on some floors. When compared to accommodation in Vita studios located within a 3-minute walk at Crosshall, they average 20m² and are similarly priced, it is clear which option students will find more attractive. Also, the studios will be completely new with high-end features, which will set Granite House apart from the tired and outdated student accommodation options and large new developments located on the outskirts. The continued appeal of Liverpool student accommodation for students and as an investment is dependent on proximity, quality of finish, management company and additional services provided.
In conclusion, although there are significant developments of student accommodation in the pipeline in Liverpool, older stock is either being repurposed or is in the suburbs where it is less convenient for students to get to lectures and return home after a night out. The repurposing of old student stock should rebalance supply and demand, and newly built city centre student apartments will always have the edge over HMOs in the suburbs. Liverpool student property investments can still be lucrative, providing investors are savvy and research the demand in the area.
Despite Brexit, the 2017/18 academic year saw the fourth largest intake of applications and acceptances, proving that there is still a desire to study in the UK. Also, the number of overseas students applying to study in the UK also increased; 2% for international students and the second largest intake on record of EU students. The increase in student numbers should strengthen demand, especially in key cities such as Liverpool where 28% of students at the University of Liverpool are from overseas, for example. These students require accommodation as they cannot simply commute from their family home to lectures every day.
One Touch Property are the exclusive agents of Granite House, the boutique development on Stanley Street in Liverpool, offering returns of 8.3% assured for two years. Work is completing in time for the 2018/19 student intake and studios can be purchased from £63,995. Contact One Touch Property to discuss possible student accommodation investments in Liverpool and other investment property options.
Interested in investment property news?
Sign up to our newsletter and keep up to date on the latest property news and investment opportunities.