The launch of student property investments for individual buyers started back in October 2011. Buyers were attracted to the high yield returns from fully managed properties.
Instead of investing £125,000 is a student property fund, like Coral Student Portfolio, private investors preferred to purchase a studio or en-suite student room. They liked the fact that they owned the leasehold property and did not have to pay a performance fee to the fund manger, thereby keeping more of the Net rental income.
According to Trustnet data, an investment in the Coral Student Portfolio has increased in value by 46.4% over 5 years (at the time of publishing). That is an annual return of 9.28% (before fees).
The high yields of student property have attracted institutional investors. Portfolio purchases have totalled £820 million over the past 12 months according to GVA Student report (Nov 2014).
New funds have been created such as publicly listed and newly established REIT Empiric raised £85million and has been one of the most acquisitive over the past year. Empiric “focuses on acquiring (or developing) assets in target towns and cities with high-quality HEIs, an attractive imbalance of supply and demand in existing student accommodation and a student profile (typically with numerous overseas and graduate students) that supports the strategy of targeting higher rental rates.”
There has been some concern about the impact of the increase in student fees and the potential clampdown on immigration. Nevertheless across the UK, there were a total of 499,370 applications for university places at the end of September 2014 that was a 3.9% increase year on year.
The limit of the number of overseas students that universities can accept has been removed and this should continue to have a positive impact on the demand side of student accommodation.
In a CBRE study of the investment intensions of Pension Funds, High Net worth Investors and Sovereign Wealth Funds; twenty seven percent (27%) had indicated that they planned to invest in student property investment.
Individual buyers have continued to seek out opportunities that generate high yields. “Our greatest interest is coming from investors of 55 years or age or more,” says One Touch Investment Director Arran Kerkvliet. “Those people that are nearing retirement are seeking steady income that does not require a great deal of management. They are hard pressed to find higher yielding property investments that requires very little time or effort”.
“The Lightbox” Liverpool boutique student accommodation investment of only 34 units that are located within 2 minutes walk from Campus. The projected Net Income of 9% is underwritten by a developers’ rental assurance for a period of three years and will be managed by an award-winning student lettings company Golding Estates.
Image c/o acearchie
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