2015 Student Guide by CSI Prop (Cornerstone International Properties)

Accommodation Investment Guide

UK’S NO.1 ASSET CLASS FAQS LOCATION FOCUS NEWS AND ANALYSIS

Q1 2015

INTERNATIONAL STUDENT NUMBERS

property investment:

What is student property Investment

ESTABLISHED MARKET The student buy-to-let market is now well established and has the ability to deliver a robust long-term, low-risk income stream. High quality developments in prime locations, preferably close to a university or city/town centre will help ensure the longevity of investor returns.

FULLY MANAGED A specialist management company experienced in the student housing sector will oversee all the maintenance and management of your unit, providing investors peace-of-mind knowing

New data shows that the number of international students in the UK is growing

INCREASE IN ANNUAL RENTAL INCOME

One of the most popular ways to invest in student accommodation is to buy units within a fully-managed development which are then leased back to a well-

Due to the high occupancy levels associated with the sector, it is safe to assume that rental returns will increase over time. Rising returns will help investors resell their units at a higher price

established management company. Typically the building, in its entirety, will be

with ample scope for yield compression.

let out as student accommodation and the turnkey nature of the investment

The international student is important to investment in the student property market, one of the country’s most attractive and popular asset classes at present.

As you will own the full title deed, you can sell your unit/units any time after exchange of contracts.

every year, providing owners with the security that when they wish to exit the investment, the asset is just as attractive as when they bought it.

2015 UK Student Accommodation Investment Guide

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target of investors in the property market. And while the number of students has faltered a little in recent years in the wake of the rising tuition fees, international numbers have recently returned to an upward trajectory.

RECORD 500,000 STUDENTS START UNIVERSITY

Breaking

places were allocated for the 2014-2015 student intake.

TOP PERFORMING UK ASSET CLASS

Marking a 3% increase when compared to last year, experts stated that this year students had a better chance to getting places through clearing describing this year as ‘an unusually good year to apply’.

Knight Frank’s 2013 Student Property Index has stated universities are competing to attract students, there was an extra 30,000 university places available. With more students now obtaining places in UK

The report cited the structural undersupply of rooms, rising rental returns every year throughout the recession and the stability of the market as driving

Knight Frank forecasts that student property returns will continue to outstrip traditional asset classes with yield compression into 2014. Rental growth in Sept 2013 was positive with Knight Frank forecasting rental growth in 2014 will move to 2.75% in the regions and 3.0% in London.

universities, there will be a more pressure placed on the already oversubscribed student accommodation sector.

JLL: MORE INVESTORS SET TO INVEST IN STUDENT ACCOMMODATION BY 2019

despite a slight fall in the number of overseas applications in

consider that only 26 per cent are from England.

2014 has seen a return to growth in the number of students

The StudyPortals International Student Satisfaction

coming to the UK from abroad. The prestige of being able to study at some of the best universities in the world, coupled

survey has also predicted that the future is bright for the student investment sector. In the coming years, it

with the fact that the quality of education provided in the UK means that there are always high numbers of people looking to study in the UK.

estimates, the volume of students in the UK who have come from other nations will rise by 15 per cent.

the aftermath of the rising tuition fees from 2011, and the 7.6 per cent drop the following year was indicative of this.

amounts to £4.9 billion per year. In total, they bring an estimated £7 billion into the UK economy each year,

However, the numbers of students in UK higher education

showing just how integral overseas students are.

has been rising ever since, and this is largely down to the number coming from other nations.

For this reason, it’s important that investment in the

For the 2014/2015 academic year, UCAS has reported that the

student property sector continues to pick up pace, in order to meet demand and make sure that international

number of students overall has increased by four per cent.

students continue to want to live and study in the UK.

This is spearheaded by the number coming from overseas. The volume of EU students coming to study in the UK has

In the past three years, investment in this asset has been

risen by 1,500 this year, a growth of eight per cent year-onyear.

strong. The £2.7 billion and £2.1 billion of money put into student properties in 2012 and 2013 respectively is

Mary Curnock Cook, UCAS’ chief executive, said:

expected to be overtaken in 2014, largely thanks to the strong quarter three, where £220 million of stock was

BETWEEN THEM AND A SIGNIFICANT

world’s top 500 universities based in the UK. The US News & World Report is a well-established US-

rankings.

UK will reach £20 billion by 2019, with investment in student accommodation set to rise by 70%.

in Europe and has a total of 5 universities ranked in the top 10.

JLL stated that investor interest could increase by 82% as the alternative markets become more acceptable to

Despite recent fears applications have risen 3% year-

strengthens its position as one of the country’s most popular asset classes.

CHOOSING TO STUDY IN BRITAIN.”

Globally, Oxford University and Cambridge University are

on-year according to the University College Admissions Service (UCAS). The UK’s tuition fees remain competitive in the global market, attracting a large number of

Higher yields – when compared to mainstream

overseas students. The UK’s reputation is excellent

opportunities – and a greater knowledge of alternatives

worldwide and fees can be as much as half of the cost of fees charged by other countries.

may also drive investment sentiment.

2015 UK Student Accommodation Investment Guide

www.experienceinvest.com Copyright Experience Invest 2014

Looking forward

The fear as we headed into 2014 was that the quick rise in demand that Help to Buy had brought about in 2013 would fade, and prices would start to stagnate once again. However, this has not been the case, and demand has remained healthy throughout the year, which has given investors a strong year overall.

The long-term future of the property market looks strong at the moment. The fact that the Bank of England’s base

Towards the end of the year, high house prices pushed demand in the rented sector higher, and investors were bringing in average monthly rents amounting to some

UK house prices have enjoyed another strong year, but how do they look moving forward?

cent mark once again.

In today’s market there are a growing number

accommodation developments. Using a proven business model to help lower investor risk,

The Risks Rewards

the likes of savings, which keeps demand healthy for the time being.

the price of properties will rise by some 19.3 per cent between now and the end of 2019 across the UK.

of investing in UK student Accommodation

Looking a little closer to the present, however, 2015 looks to be a year that sees positivity after an uncertain start. May 2015 will see Brits head to the polling stations once again to vote in the general election. And as is to be expected, this is likely to create a safer approach for most/

successful investment strategy. Whilst it is generally assumed that the higher the reward usually means the higher the risk of the investment, this is not always the case if you research the opportunity properly. It is important that you know all the information about any investment you are considering and evaluate the risks and rewards.

The Guardian reported that in September, the average price for a house in the UK sat at £273,000, down ever so slightly from the £274,000 that was hailed as a new record high just a month before.

well

ings

now evolved to such an extent that it is now common place to have investor’s funds held in secure solicitor’s accounts. It is important to note that these secure accounts are set up to trigger payments to the developer for the build but are only released against Architect stages of a build have been completed. This will ensure greater security of investor’s

Investors should also ensure that the build cost

and all other costs are worked out beforehand and that the units are priced correctly. Investors

REWARDS

unit is covered by contingency money for any building oversights.

funds.

Whilst title deeds and all other legal documentation are important and need to

be forthcoming, a valid and transparent legal

RISKS

CAL

build and management of the accommodation worked out in great detail, which enable developers to provide investors with assured income paid monthly.

5 UK

Stu

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Jerald’s TOP TIPS FOR STUDENT PROPERTY INVESTMENT

If you are thinking about investing in student property, Jerald Solis, Experience Invest’s Head of Business Development, has compiled his top 5 tips for to help guide investors to a successful investment:

www.experienceinvest.com Copyright Experience Invest 2014

Student accommodation projects in less central locations are also often priced at lower rental values. These options lower priced options are attractive to students who are happy to cycle or use public transport or even have cars for that matter.

Over the past 5 years, student property has emerged as a key component in an income generating investment portfolio. We’ve rounded-up our top 5 reasons as to why student property investment is here to stay.

Demand When considering a good Student Accommodation investment you have to be mindful of the size of the student body attending the particular university in the town or city. It is always important to have a shortfall between the number of students attending the university and the supply of beds being supplied by the university and private landlords. Having a shortage in supply will help to ensure high occupancy levels and will help to safeguard yields and secure the long term health of the investment. When considering demand it is worth looking into the number of purpose built accommodation against Houses of Multiple Occupants (HMO). An ideal project will be in a location where there is a limited supply of HMO’s as they can sometimes be hard to compete against as they are often priced extremely low for rental but are largely substandard properties.

a strong one for the sector. With sentiment still riding high, supply low and demand continuing at a sustained level,

Location

prices should start to climb again in the second half of the year.

Luton

geme

University with new facilities being planned or built will have expansion in mind and will therefore mean that the demand for accommodation will be greater.

universities. Regionally, the UK is home the top 4 universities in Europe and has a total of 5 universities ranked in the top 10. What’s more, the QS World University Rankings 2014 has ranked 6 of the UK’s universities in the world’s top 20 educational institutions. Ranked number 2 in the

Yield

world, Cambridge is the highest ranked UK university, with Imperial College London ranked 3rd, the University of Oxford ranked joint 5th with University College London (UCL), King’s College London a project

it is

(KCL) ranked 16th and the University of Edinburgh ranked in 17th place.

ering the projected yields are achievable from the very beginning. Looking into and carrying out due diligence consid when rity student s r and negate neighbouring developments are charging is essential. The yield investo into Se thecu currentevery market and what as this

or Invest

of granted the core been be at d to: has sion y should is adhere ng g Permis ent securit followi ment y. Plannin Investm le that the environ securit s where buying investor advisab at project safe ise ainty. in a look the maxim uncert you’re 1. Only with ed to that pment ensure be design ts remain develo riately. ant to have to deposi approp your import cts that is also Contra are used sure 2. It All good y Legal make the funds to ask. nces whereb that assed comme will ensure be embarr the build This don’t ted. 3. Once s and comple update already ction constru for works regular ask for 4. Always

It may end up seeing slower rates of increase than in 2013 or 2014, but the fact there is a general election, and following the very impressive performance of the two

Where to invest?

years before it, Savills’ prediction that UK house prices will

There has been much talk within the

regions - shows that the sector will remain strong.

investment property community about the best locations in the UK to invest. After conducting our own research within

Looking into what the local University charges is always useful as they are often heavily subsidised against the private accommodation providers. A Student accommodation project which is pegged against the local University’s rental charges will fare better than those that have based their prices on the private sector. In cases where rental prices have been based on private rents, it is advisable to look at the management company being used as their track record may give you comfort on them being able to achieve these rents.

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2015

UK Stud

Accomm

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Rising student numbers

The 2014/2015 intake saw recording breaking numbers of students allocated university places. With around 500,000 new students attending courses, student numbers increased by 3% when compared 23

Inv

y market

which we consider good spots for student property investment.

than average

investor

returns.

Liverpool is one of the most established centres in the UK for higher education and is home to a number of leading institutions including The University of Liverpool, Liverpool John Moores

With a campus in Luton, the University of Bedfordshire is the largest higher education institution in the county and provides excellent

University, Liverpool Hope University and The

opportunities students to access top quality higher education.

The combined student population currently stand at 53,000 – almost 12% of the city’s total

London Typically ranked as the number 1 spot for student property investment, London has a large number of sought-after

Higher than average yields

The student housing market is considered a stable investment by many leading industry bodies due to the sector’s ability to produce stable returns throughout the economic downturn. High returns are partly driven by consistent occupancy rates of 99% or higher (CBRE), with many private landlords able to secure year-long tenancies and even payment upfront due to the structure in which student loans are paid to students. What’s more, the future looks bright for the sector. Knight Frank’s 2014 Student Property report forecasts that 2014 will see a rise in rental growth, improving yields and ‘improved investment performance for existing funds.’

International students

The UK continues to attract interest from international students as many applications are happy to study overseas to obtain the best possible education. According to UCAS, UK universities have seen a rise in the number of applicants from non-EU students for four consecutive years.

the largest amount of overseas students in the world. The UK aims to see an increase of 30,000

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Over the last few years development of student property in the city has been fairly active. Investors should take this fact into consideration when investing in Liverpool as, in order to receive stable returns, the investment must be tangible and located in close proximity to one of the city’s leading higher educational

There is a distinct lack of new, purpose-built accommodation in the area. Current student

establishments.

property is out of date and does not answer to the demand from students.

Nottingham

Manchester is a thriving student city which

Home to 34,000 students, Nottingham is

is home to the University of Manchester, Manchester Metropolitan University and the

a popular location for students. The City is home to two well-established education

University of Salford.

institutions - University of Nottingham and

The City is one of the UK’s most fashionable locations for student and with a 50,000-strong

Nottingham Trent University – and has a current undersupply of purpose-built student accommodation.

student population, the city is a prime location for student accommodation investment.

With great nightlife, a range of bars and

2015 UK Student Accommodation Investment Guide

restaurants, rich cultural heritage and good transport links around the city and to the rest of the UK, Nottingham is a proven location for student accommodation investment.

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Why invest in student property?

Need to free up residential properties

The latest Spotlight UK Student Housing summer 2013 from Savills has reported a lull in the UK’s residential housing market due to shortfall of supply and an inability of house builders to deliver larger volumes. According to the report there are around 66,000 family houses that have been turned into student HMOs. If these houses were to be freed up, there would be a new demand for 260,000 new student beds across the country.

Student

Accom

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Assured income in years

(45%)

Capital growth

(18%)

Interest paid on funds

(8%)

Payment plan

(10%)

Location

(20%)

population – with students from over 100 countries in the world enrolled.

Home to over 24,000 students from over 100 countries, the University of Bedfordshire’s main campus is located in Luton town centre.

are ranked number four in the country.

strong returns if the development is situated in close proximity to a university campus.

2015 UK

Liverpool University of Performing Arts.

In 2004, the University was awarded by The Sunday Times with the title of “Best New University.” Its courses in Nursing and Midwifery

Manchester

Here are the results:

process, we have selected a number of key locations across the country

Last year we asked our readers, ‘What aspect of student property investment is most important to you?’ 15

of the reserve was previously Funds are one that Large Pension class and public. d asset investing is an establishe the general dation to accommo available Student but is now al funds institution

the guidelines of our strict due diligence

The research shows that the average university town houses 26% of its students in halls of residence

and stable return on your investment.

2015 UK Student Accommodation Investment Guide

UK is home to top universities

According to the new US News & World Report, the UK is home to 38 of the world’s top 500

ion

of UK propert  Security laws ip ownersh

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Liverpool

Located 30 miles north and within commuting distance of London, Luton is a large town in Bedfordshire.

international students registering for higher educational courses by 2020.

any Comp into the University’s forecasted intake or expansion plans will also be a good guide to demand. A ntLooking

ining for maintaStudent A record ent. a track ny with good investm y. compa of a securit ement tone income manag r corners ined a good anothe provide mainta g is rd is ent and of having standa ance the buildin and the investm that high import returns y of to a The your to ensure viabilit ties term receive sibility proper you respon the long ny’s ty. ed before Compa will ensure t proper and be deductstuden ement will sing Manag nance be the mainte when purcha It will and fees eration ement consid into all manag taken be should

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However, being further away from the University Campus does not mean that you should not consider it for your portfolio. The project can overcome its disadvantage by having better facilities or have oversized accommodation.

However, that’s not to say that 2015 as a whole will not be

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reasons why student property is here to stay

est

In fact, there are more international students studying in London than in any other city in the world. In total there are around 350,000 students currently studying in London and there are roughly 45 universities.

Location

t Acc

higher

higher educational establishments and it has a wide appeal to overseas students.

When considering a Student Accommodation project investors should always be mindful of its proximity to the university. Being within easy reach of the University Campus is a must where the golden rule is; the closer you are the quicker the property will be tenanted. It is also important to consider the development’s proximity to local shopping and entertainment as well as good public transport links.

den

months of the year, the average price of UK property may even fall slightly by 0.5 per cent.

As the year draws to an end, however, 2014 can be seen as a successful one for the property market. It is a year in which it has lived up to the example set by 2013, with demand continuing to sit at a strong level and the appreciation in values rising, which can only be good news for investors. Savills estimates that by the end of the year, the average UK house will have grown in price by 8.5 per cent, marginally faster than ;ast year even.

2015 UK Student Accommodation Investment Guide

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2015 UK Student Accommodation Investment14 Guide

www.experienceinvest.com Copyright Experience Invest 2014

and

d ts. locate To minimise risk, investors should look for are t tenan that

Student accommodation investments have

201

However, while the start of 2014 continued the strong demand that was seen at the end of last year Countrywide reported that there were ten potential buyers battling for every home that came onto the market in January - sentiment and demand would fall somewhat towards the end of the year.

Snapshot of the business model

Business Model

system of purchasing property such as the one found in the UK is also crucial.

With the potential for the mansion tax looming, and no

reporting that year-on-year house price rises were at 10.2 per cent.

What our investors think...

investors are rewarded with higher returns than more traditional buy-to-let investments.

rate remains at its historic 0.5 per cent low means that people still rightly see property as a stronger asset than

no barrier, with demand continuing to grow time and

investors coming back to property, seeking out the potential for strong capital gains down the line. It also left 2014 with a lot to live up to, however. So has this year managed to extend the healthy run in the property market? And how does it sit poised as we move towards 2015?

www.experienceinvest.com Copyright Experience Invest 2014

As the guide is online, it is regularly updated throughout the year to ensure that investors are kept up-to-date.

of property developers who are looking

one quite sure of which party will come to power, chances

This new-found health in a market that had toiled somewhat

much as 8.4 per cent in the space of just 12 months.

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Student accommodation investment

2014

This has been the year where many regional areas have followed in the footsteps of London, with peak prices from 2007 being exceeded in parts of the country outside the capital at last. This sort of health also saw investors able to enjoy success in the buy-to-let market.

recover in the early part of 2013, with the government’s new Help to Buy scheme kickstarting the property sector

2015 UK Student Accommodation Investment Guide

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WHAT’S NEXT FOR UK HOUSE

In its third year, the guide has been produced to deliver breaking news and expert information about the UK’s student property market. With over 26,000 unique views, the 2014 guide proved to be a popular source of information for investors looking to invest in the UK’s no.1 asset class.

And with UCAS reporting that the number of those coming to the UK from overseas is on the rise once

INCREASE IN STUDENTS FROM THE EU

based publisher of education analysis and rankings and is considered a reliable source of information for education

In regional rankings, the UK is home the top 4 universities

Welcome

Overseas students are vital to the UK economy, and A drop in student applications overall was to be expected in

THERE IS INCREASED FLUIDITY

Jones Lang LaSalle’s alternative investment seminar predicted that investment in alternative property assets in

www.experienceinvest.com Copyright Experience Invest 2014

people studying towards a Master’s Degree in the UK are now from China - a massive proportion when we

RECRUITMENT IN ALL UK COUNTRIES,

A new US News & World Report has shown that 38 of the

institutional investors.

According to Higher Education Funding Council for

The UK is widely recognised as being one of the most popular places for students from other nations to study, and

“ALONGSIDE RISING STUDENT

38 OF THE WORLD’S TOP 500 UNIVERSITIES BASED IN THE UK

Described as a ‘buyer’s market’ due to the fact that

that, “Total returns in the student accommodation sector have outperformed all other traditional asset classes… This has been the case since 2011.”

factors behind the success of the asset class.

it’s not just undergraduate courses that are helping to boost the volume of foreign students in the UK.

million by the end of 2015.

CAN I SELL MY UNIT AT ANY TIME?

As the asset receives a higher income, it becomes more valuable and saleable

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Each year, roughly one in ten of the half a million new undergraduates embarking on courses in the UK are from overseas, Universities UK has estimated. However,

operation and Development (OECD), the number of people worldwide who study overseas has risen from 2.1 million in

ASSURED RETURNS development who will be contractually obliged to pay returns even if the unit is not occupied.

How does the investment work?

Across the world, studying overseas has always been an attractive option, but in the last 15 years it has really picked up pace. According to the Organisation for Economic Co-

 Higher yield per annum than traditional buy-to-let  Low entry level - Invest from £49,500  Passive income assured for a predetermined duration  High occupancy rates of 99% (CBRE)

(university or privately operated), 38% in their own or parental home and the remaining 26% in the private rented sector.

 UK’s no.1 asset class since 2011

Freeing up converted residential properties by building purpose-built accommodation will help ease

 Fully managed by an experienced Management Company

demand for properties in the UK’s housing market.

 Exclusive UK opportunities only available through Experience Invest

to last year (UCAS).

NOW

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2015 UK Student Accommodation Investment Guide

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2015 UK Student Accommodation Investment Guide

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FAQs How are my funds protected during the construction period?

How can I exit the investment?

“I decided to purchase a number of property investments in Liverpool due to low entry level of

it through other agents, on the internet or gift it to family/friends.

University College Admissions Service (UCAS). The UK’s tuition fees remain competitive in the global market, attracting a large number of overseas students. The UK’s reputation is excellent worldwide and fees can be as much as half of the cost of fees charged by other countries.

Next steps To discuss your requirements with one of our property consultants or to request further information on any of the following:

Peter Morgan, UK • Property details

Who is responsible for repairs & maintenance?

• Payment Process

The Management Company will deal with any repairs and maintenance. The cost of

• Availability

involved. Also I was investing in the UK and investment was covered by UK law. I found the

repairs will be deducted from the student’s deposit and maintenance will be paid for

buying process straight forward and my sales consultant was both knowledgeable and straight forward. I had no problems at all purchasing through Experience Invest and I would certainly

proactive maintenance.

buy through them again.”

Trevor Scott, Singapore

Can I raise a mortgage on a student property?

“I have dealt with Dale Anderson from Experience Invest. He is an ex- South African now living in

contractor once the quantity surveyor and architect have inspected the site and have

Despite recent fears applications have risen 3% year-on-year according to the

the month and statements right on time at the start of each month. My sales consultant was knowledgeable and helpful and I would buy through Experience Invest’s UK division again.”

prepared to pay a premium for a completed and operational property. You can also sell

Clients funds are held by a UK solicitor and payments shall be made to the building

Aren’t student numbers declining?

the investment and the high yields. I am very happy and have no complaints with the excellent service I have received from my purchase in Liverpool. Rent is paid promptly at the start of

also have a large investor base that we can advertise and sell units to, some of which are

My Experience Client Testimonials

investor that has been involved with Experience Invest for a few years now and he is happy with

• Reserving a Unit • Booking a meeting

Please call us on: +44 (0) 207 321 5858 info@experienceinvest.com

John Papademetriou, South Africa

“Overall I found the buying process easy, professional and straight forward. Experience Invest responded quickly and accurately to my phone calls and emails. My client manager was very professional in his approach and was fully knowledgeable about all the properties I have been interested in. The process was so easy that I have bought two more properties.”

large proportion of students would prefer to remain in halls if they could. According to the 2013 Student Accommodation Tracker, only 28% of student

James Alan Hey, UK

accommodation currently meets rising expectations.

www.experienceinvest.com

2015 UK Student Accommodation Investment Guide

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2015 UK Student Accommodation Investment Guide

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2015 UK Student Accommodation Investment Guide

What is student property Investment How does the investment work? One of the most popular ways to invest in student accommodation is to buy units within a fully-managed development which are then leased back to a wellestablished management company. Typically the building, in its entirety, will be let out as student accommodation and the turnkey nature of the investment

As the asset receives a higher income, it becomes more valuable and saleable every year, providing owners with the security that when they wish to exit the investment, the asset is just as attractive as when they bought it.

property investment: ESTABLISHED MARKET The student buy-to-let market is now well established and has the ability to deliver a robust long-term, low-risk income stream. High quality developments in prime locations, preferably close to a university or city/town centre will help ensure the longevity of investor returns.

FULLY MANAGED A specialist management company experienced in the student housing sector will oversee all the maintenance and management of your unit, providing investors peace-of-mind knowing

ASSURED RETURNS development who will be contractually obliged to pay returns even if the unit is not occupied.

INCREASE IN ANNUAL RENTAL INCOME Due to the high occupancy levels associated with the sector, it is safe to assume that rental returns will increase over time. Rising returns will help investors resell their units at a higher price with ample scope for yield compression.

CAN I SELL MY UNIT AT ANY TIME? As you will own the full title deed, you can sell your unit/units any time after exchange of contracts.

2015 UK Student Accommodation Investment Guide

RECORD 500,000 STUDENTS START UNIVERSITY

Breaking

places were allocated for the 2014-2015 student intake.

TOP PERFORMING UK ASSET CLASS

Knight Frank’s 2013 Student Property Index has stated that, “Total returns in the student accommodation sector have outperformed all other traditional asset classes… This has been the case since 2011.” The report cited the structural undersupply of rooms, rising rental returns every year throughout the recession and the stability of the market as driving factors behind the success of the asset class. Knight Frank forecasts that student property returns will continue to outstrip traditional asset classes with yield compression into 2014. Rental growth in Sept 2013 was positive with Knight Frank forecasting rental growth in 2014 will move to 2.75% in the regions and 3.0% in London.

Described as a ‘buyer’s market’ due to the fact that universities are competing to attract students, there was an extra 30,000 university places available. With more students now obtaining places in UK universities, there will be a more pressure placed on the already oversubscribed student accommodation sector.

JLL: MORE INVESTORS SET TO INVEST IN STUDENT ACCOMMODATION BY 2019 Jones Lang LaSalle’s alternative investment seminar predicted that investment in alternative property assets in UK will reach £20 billion by 2019, with investment in student accommodation set to rise by 70%. JLL stated that investor interest could increase by 82% as the alternative markets become more acceptable to institutional investors. Higher yields – when compared to mainstream opportunities – and a greater knowledge of alternatives may also drive investment sentiment.

38 OF THE WORLD’S TOP 500 UNIVERSITIES ARE BASED IN THE UK A new US News & World Report has shown that 38 of the world’s top 500 universities based in the UK. The US News & World Report is a well-established USbased publisher of education analysis and rankings and is considered a reliable source of information for education rankings. Globally, Oxford University and Cambridge University are

In regional rankings, the UK is home the top 4 universities in Europe and has a total of 5 universities ranked in the top 10. Despite recent fears applications have risen 3% yearon-year according to the University College Admissions Service (UCAS). The UK’s tuition fees remain competitive in the global market, attracting a large number of overseas students. The UK’s reputation is excellent worldwide and fees can be as much as half of the cost of fees charged by other countries.

2015 UK Student Accommodation Investment Guide

INTERNATIONAL STUDENT NUMBERS

New data shows that the number of international students in the UK is growing The international student is important to investment in the student property market, one of the country’s most attractive and popular asset classes at present.

Across the world, studying overseas has always been an attractive option, but in the last 15 years it has really picked up pace. According to the Organisation for Economic Cooperation and Development (OECD), the number of people worldwide who study overseas has risen from 2.1 million in

Each year, roughly one in ten of the half a million new undergraduates embarking on courses in the UK are from overseas, Universities UK has estimated. However, it’s not just undergraduate courses that are helping to boost the volume of foreign students in the UK.

million by the end of 2015.

According to Higher Education Funding Council for

The UK is widely recognised as being one of the most popular places for students from other nations to study, and despite a slight fall in the number of overseas applications in

people studying towards a Master’s Degree in the UK are now from China - a massive proportion when we consider that only 26 per cent are from England.

2014 has seen a return to growth in the number of students coming to the UK from abroad. The prestige of being able to study at some of the best universities in the world, coupled with the fact that the quality of education provided in the UK means that there are always high numbers of people looking to study in the UK.

The StudyPortals International Student Satisfaction survey has also predicted that the future is bright for the student investment sector. In the coming years, it estimates, the volume of students in the UK who have come from other nations will rise by 15 per cent. Overseas students are vital to the UK economy, and

A drop in student applications overall was to be expected in the aftermath of the rising tuition fees from 2011, and the 7.6 per cent drop the following year was indicative of this. However, the numbers of students in UK higher education has been rising ever since, and this is largely down to the number coming from other nations. For the 2014/2015 academic year, UCAS has reported that the number of students overall has increased by four per cent. This is spearheaded by the number coming from overseas. The volume of EU students coming to study in the UK has risen by 1,500 this year, a growth of eight per cent year-onyear. Mary Curnock Cook, UCAS’ chief executive, said:

“ALONGSIDE RISING STUDENT RECRUITMENT IN ALL UK COUNTRIES,

amounts to £4.9 billion per year. In total, they bring an estimated £7 billion into the UK economy each year, showing just how integral overseas students are. For this reason, it’s important that investment in the student property sector continues to pick up pace, in order to meet demand and make sure that international students continue to want to live and study in the UK. In the past three years, investment in this asset has been strong. The £2.7 billion and £2.1 billion of money put into student properties in 2012 and 2013 respectively is expected to be overtaken in 2014, largely thanks to the strong quarter three, where £220 million of stock was

And with UCAS reporting that the number of those coming to the UK from overseas is on the rise once

THERE IS INCREASED FLUIDITY BETWEEN THEM AND A SIGNIFICANT

strengthens its position as one of the country’s most popular asset classes.

INCREASE IN STUDENTS FROM THE EU CHOOSING TO STUDY IN BRITAIN.”

2015 UK Student Accommodation Investment Guide

WHAT’S NEXT FOR UK HOUSE UK house prices have enjoyed another strong year, but how do they look moving forward? This new-found health in a market that had toiled somewhat recover in the early part of 2013, with the government’s new Help to Buy scheme kickstarting the property sector much as 8.4 per cent in the space of just 12 months.

2014

Looking forward

The long-term future of the property market looks strong at the moment. The fact that the Bank of England’s base rate remains at its historic 0.5 per cent low means that people still rightly see property as a stronger asset than the likes of savings, which keeps demand healthy for the time being.

the price of properties will rise by some 19.3 per cent between now and the end of 2019 across the UK.

Towards the end of the year, high house prices pushed demand in the rented sector higher, and investors were bringing in average monthly rents amounting to some cent mark once again.

no barrier, with demand continuing to grow time and reporting that year-on-year house price rises were at 10.2 per cent. However, while the start of 2014 continued the strong demand that was seen at the end of last year Countrywide reported that there were ten potential buyers battling for every home that came onto the market in January - sentiment and demand would fall somewhat towards the end of the year. The Guardian reported that in September, the average price for a house in the UK sat at £273,000, down ever so slightly from the £274,000 that was hailed as a new record high just a month before.

months of the year, the average price of UK property may even fall slightly by 0.5 per cent. However, that’s not to say that 2015 as a whole will not be a strong one for the sector. With sentiment still riding high, supply low and demand continuing at a sustained level, prices should start to climb again in the second half of the year. It may end up seeing slower rates of increase than in 2013 or 2014, but the fact there is a general election, and following the very impressive performance of the two years before it, Savills’ prediction that UK house prices will regions - shows that the sector will remain strong.

2015 UK Student Accommodation Investment Guide

Student accommodation investment In today’s market there are a growing number of property developers who are looking accommodation developments. Using a proven business model to help lower investor risk, investors are rewarded with higher returns than more traditional buy-to-let investments.

The Risks Rewards

of investing in UK student accommodation

Business model Student accommodation investments have now evolved to such an extent that it is now common place to have investor’s funds held in secure solicitor’s accounts. It is important to note that these secure accounts are set up to trigger payments to the developer for the build but are only released against Architect stages of a build have been completed. This will ensure greater security of investor’s funds.

Snapshot of the business model To minimise risk, investors should look for student accommodation projects that are situated in a location with a high demand. A well located project will attract the interest of experienced management companies who will take care of the day-to-day running and maintenance of the investment. Investors should also ensure that the build cost and all other costs are worked out beforehand and that the units are priced correctly. Investors unit is covered by contingency money for any building oversights.

Whilst title deeds and all other legal documentation are important and need to be forthcoming, a valid and transparent legal system of purchasing property such as the one found in the UK is also crucial.

build and management of the accommodation worked out in great detail, which enable developers to provide investors with assured income paid monthly.

2015 UK Student Accommodation Investment Guide

THE PROJECT COULD TAKE LONGER TO BUILD AND COMPLETE THAN EXPECTED

Established buildings that are located well and managed well will always attract tenants.

Whilst no one can legislate for inclement weather and other external factors that might lead to delays in the build, this is a risk that can be dealt with by asking questions on the experience of the developers contractors. Any reputable project will have contingencies in place for any overruns in completing the project.

DECLINE ALONG WITH DEMAND

Good developers will report back to clients to assure them throughout the build. They will have regular reports given to them from their contractors which should give them sight of potential delays, which they should be able to avert through various means such as further resourcing of manpower.

THE LOCATION MIGHT NOT BE THE BEST Let’s look at some of the risks and rewards you need to consider before investment in any student accommodation project.

RISKS THE DEVELOPMENT COMPANY COULD GO INTO LIQUIDATION

Ensuring that all funds are placed in solicitor’s accounts and

THE BUILD AND MANAGEMENT COSTS COULD HAVE BEEN CALCULATED WRONG OR INACCURATELY The use of experienced contractors will ensure that build costs are monitored and budgets are adhered to. Whilst project managers, quantity surveyors and architects will be employed for each project it is always good to have an independent project monitoring service that sits separately from the usual professionals, whose primary task is cost management and invoice payment monitoring.

It is important to note that the closer a project is to the university the quicker it will let out. There is generally correlation in occupancy to distance away from the university, but rental prices and their sensitivity against the subsidised rents quoted by the university itself for its own halls of residence will be important to successfully letting the property. Another way of overcoming location is through the facilities and amenities available to students at any given project.

COMPETITION FROM THE LOCAL MARKET It is inevitable that there may be other student buildings in the pipeline however this shouldn’t matter if your investment is in a good location, has great local amenities and transport links, and if your purpose-built development has good on site facilities.

means that funds are never put at risk. Another way to sidestep this issue is for the developer As funds have been allocated for construction, the risk of the developer going into liquidation is minimal and as the build has been essentially paid for a new team could be installed to complete the project.

which means that mistakes in calculations will be the responsibility of the contractors and not the development team.

A good management company will also attract students and their services will help ensure that the building is maintained to the highest of standards and will look fresh no matter how long it has been in operation.

STUDENT NUMBERS COULD

Whilst this is a real danger, statistics and trends in the knowledge economy seem to favour upward trends. However, it would be prudent to verify demand as successful student projects will be in locations where there are acute shortages in the supply of accommodation to number of students requiring beds.

RENTAL INCOME COULD DROP AFTER THE ASSURED TIME PERIODS Verifying the charges being levied by the university as well as the broader private market should provide certain assurances about future rental prices. However, you can to an extent future proof your investment by purchasing projects that have guaranteed rental income. Receiving assured income of this nature for market should be stable at higher than the rents quoted as the market rental prices tend to rise with Notwithstanding this, it will ensure that you have, at worst, the same level of income as with that already guaranteed on purchase.

THE MANAGEMENT COMPANY COULD GO INTO LIQUIDATION OR PROVIDE A POOR SERVICE Again, picking a stable and long-standing management company will help to reduce the risk of this happening. In the event that this happens in a project where the income is guaranteed, the developers will resolve the matter. Diligent developers and freeholders will always want to be involved in resolving any matter of this nature.

2015 UK Student Accommodation Investment Guide

REWARDS  Proven business model  No.1 asset class  Higher yields  Invested funds security  Assured income  Low entry level  Sustainable market, growing with high demand  Strong market conditions  Capital growth potential as property prices in the UK market are on the rise and anticipated to continue to do so for the foreseeable future  Security of UK property market with strong clear and transparent property ownership laws

Student accommodation is an established asset class and one that was previously the reserve of institutional funds but is now available to the general investing public. Large Pension Funds are

higher than average investor returns.

2015 UK Student Accommodation Investment Guide

Location

Luton Located 30 miles north and within commuting distance of London, Luton is a large town in Bedfordshire. With a campus in Luton, the University of Bedfordshire is the largest higher education institution in the county and provides excellent opportunities students to access top quality higher education.

Where to invest? There has been much talk within the investment property community about the best locations in the UK to invest. After conducting our own research within

Home to over 24,000 students from over 100 countries, the University of Bedfordshire’s main campus is located in Luton town centre. In 2004, the University was awarded by The Sunday Times with the title of “Best New University.” Its courses in Nursing and Midwifery are ranked number four in the country. There is a distinct lack of new, purpose-built accommodation in the area. Current student property is out of date and does not answer to the demand from students.

Liverpool Liverpool is one of the most established centres in the UK for higher education and is home to a number of leading institutions including The University of Liverpool, Liverpool John Moores University, Liverpool Hope University and The Liverpool University of Performing Arts. The combined student population currently stand at 53,000 – almost 12% of the city’s total population – with students from over 100 countries in the world enrolled. Over the last few years development of student property in the city has been fairly active. Investors should take this fact into consideration when investing in Liverpool as, in order to receive stable returns, the investment must be tangible and located in close proximity to one of the city’s leading higher educational establishments.

the guidelines of our strict due diligence process, we have selected a number of key locations across the country

Glasgow

Sheffield

which we consider good spots for student property investment.

London Typically ranked as the number 1 spot for student property investment, London has a large number of sought-after higher educational establishments and it has a wide appeal to overseas students. In fact, there are more international students studying in London than in any other city in the world. In total there are around 350,000 students currently studying in London and there are roughly 45 universities.

strong returns if the development is situated in close proximity to a university campus.

cities to be elevated to Savills top-tier of stend property investment from a list of over 70 locations. This shows that Savills independent research, assessing factors such as supply and demand, international appeal of universities and future prospects, has deemed Glasgow as

with two major universities and a 30% growth These factors alone demonstrate how strong the proposition is for student property investthat 45,000 students don’t have access to any purpose-built accommodation.

invstments in the UK. The city can only guarantee housing for around 10% of students. Knight Frank’s Student Property 2014 report also estimates that 75% of Glasgow students are forced to live in houses of multiple occupancy (HMO).

Because of the size of its student population, the student property sector is relatively well-established compared with other cities in the UK. However, as a result, a fairly competitive marketplace has emerged over the last decade.

2015 UK Student Accommodation Investment Guide

Location When considering a Student Accommodation project investors should always be mindful of its proximity to the university. Being within easy reach of the University Campus is a must where the golden rule is; the closer you are the quicker the property will be tenanted. It is also important to consider the development’s proximity to local shopping and entertainment as well as good public transport links. However, being further away from the University Campus does not mean that you should not consider it for your portfolio. The project can overcome its disadvantage by having better facilities or have oversized accommodation. Student accommodation projects in less central locations are also often priced at lower rental values. These options lower priced options are attractive to students who are happy to cycle or use public transport or even have cars for that matter.

TOP TIPS FOR STUDENT PROPERTY INVESTMENT 20

When considering demand it is worth looking into the number of purpose built accommodation against Houses of Multiple Occupants (HMO). An ideal project will be in a location where there is a limited supply of HMO’s as they can sometimes be hard to compete against as they are often priced extremely low for rental but are largely substandard properties. Looking into the University’s forecasted intake or expansion plans will also be a good guide to demand. A University with new facilities being planned or built will have expansion in mind and will therefore mean that the demand for accommodation will be greater.

Yield the projected yields are achievable from the very beginning. Looking into and carrying out due diligence into the current student market and what neighbouring developments are charging is essential. The yield and stable return on your investment. Looking into what the local University charges is always useful as they are often heavily subsidised against the private accommodation providers. A Student accommodation project which is pegged against the local University’s rental charges will fare better than those that have based their prices on the private sector. In cases where rental prices have been based on private rents, it is advisable to look at the management company being used as their track record may give you comfort on them being able to achieve these rents.

2015 UK Student Accommodation Investment Guide

Management Company The importance of having a good management company with a track record for maintaining properties to a high standard is another cornerstone of a good investment. A Student and will ensure the long term viability of the investment and provide income security. It will be the Management Companyâ&#x20AC;&#x2122;s responsibility to ensure that the building is maintained all management fees and maintenance will be deducted before you receive your returns and should be taken into consideration when purchasing student property.

Investor Security Investment security should be at the core of every investor and when considering a project it is advisable that the following is adhered to: 1. Only look at projects where Planning Permission has been granted as this negates development uncertainty. 2. It is also important to ensure that youâ&#x20AC;&#x2122;re in a safe buying environment whereby Legal Contracts have to be designed to maximise investor security. 3. Once the build commences make sure that your deposits remain with the for works already completed. This will ensure that the funds are used appropriately. 4. Always ask for regular construction updates and donâ&#x20AC;&#x2122;t be embarrassed to ask. All good

2015 UK Student Accommodation Investment Guide

reasons why student property is here to stay Over the past 5 years, student property has emerged as a key component in an income generating investment

portfolio. We’ve rounded-up our top 5 reasons as to why

What’s more, the future looks bright for the sector. Knight Frank’s 2014 Student Property report forecasts that 2014 will see a rise in rental growth, improving yields and ‘improved investment

student property investment is here to stay.

performance for existing funds.’

4 1

UK is home to top universities

According to the new US News & World Report, the UK is home to 38 of the world’s top 500 universities. Regionally, the UK is home the top 4 universities in Europe and has a total of 5 universities ranked in the top 10. What’s more, the QS World University Rankings 2014 has ranked 6 of the UK’s universities in the world’s top 20 educational institutions. Ranked number 2 in the world, Cambridge is the highest ranked UK university, with Imperial College London ranked 3rd, the University of Oxford ranked joint 5th with University College London (UCL), King’s College London (KCL) ranked 16th and the University of Edinburgh ranked in 17th place.

Rising student numbers

The 2014/2015 intake saw recording breaking numbers of students allocated university places. With around 500,000 new students attending courses, student numbers increased by 3% when compared to last year (UCAS). The UK continues to attract interest from international students as many applications are happy to study overseas to obtain the best possible education.

Higher than average yields

Substandard HMOs

Due to a lack of University-operated accommodation, traditionally residential properties were converted into student housing - Houses in Multiple Occupation (HMO). Older houses with lots of rooms to rent suited the student market however this type of property is usually considered substandard. The introduction of a HMO Licence, whereby properties had to reach a certain standard for approval, meant that many properties were unable to continue to legally house students. Students are now opting to stay in modern purpose-built properties which usually have on-site facilities, better security measures and are inclusive of bills.

Need to free up residential properties

According to UCAS, UK universities have seen a rise in the number of applicants from non-EU students for four consecutive years.

The research shows that the average university town houses 26% of its students in halls of residence (university or privately operated), 38% in their own or parental home and the remaining 26% in the private rented sector.

the largest amount of overseas students in the world. The UK aims to see an increase of 30,000 international students registering for higher educational courses by 2020.

Freeing up converted residential properties by building purpose-built accommodation will help ease demand for properties in the UK’s housing market.

2015 UK Student Accommodation Investment Guide

Why invest in student property?  Higher yield per annum than traditional buy-to-let  Low entry level - Invest from £49,500  Passive income assured for a predetermined duration  High occupancy rates of 99% (CBRE)  UK’s no.1 asset class since 2011  Fully managed by an experienced Management Company  Exclusive UK opportunities available

2015 UK Student Accommodation Investment Guide

FAQs How are my funds protected during the construction period?

How can I exit the investment? A also have a large investor base that we can advertise and sell units to, some of which are prepared to pay a premium for a completed and operational property. You can also sell it through other agents, on the internet or gift it to family/friends.

Who is responsible for repairs & maintenance? The Management Company will deal with any repairs and maintenance. The cost of repairs will be deducted from the student’s deposit and maintenance will be paid for proactive maintenance.

Can I raise a mortgage on a student property?

Clients funds are held by a UK solicitor and payments shall be made to the building contractor once the quantity surveyor and architect have inspected the site and have

Aren’t student numbers declining? Despite recent fears applications have risen 3% year-on-year according to the University College Admissions Service (UCAS). The UK’s tuition fees remain competitive in the global market, attracting a large number of overseas students. The UK’s reputation is excellent worldwide and fees can be as much as half of the cost of fees charged by other countries.

Don’t universities have their own accommodation? year students who typically live in the university’s halls of residence, creating demand for privately owned accommodation. Students from the second year onwards are large proportion of students would prefer to remain in halls if they could. According to the 2013 Student Accommodation Tracker, only 28% of student accommodation currently meets rising expectations.

2015 UK Student Accommodation Investment Guide

Accommodation Investment Guide