New research, carried out by student property investment specialists The Mistoria Group, has shown that the average gross cash rental yields for the student property sector in the North West were 13% for the first three quarters of 2014. This was significantly more than the 6.37% forecast for average student property yields across the UK for 2014.
The findings also revealed that the gross cash rental yields for student property in the North West increased by 8% year on year, representing a 22% rise over the last five years. Moreover, the yields are 5-6% higher on average than the buy-to-let market as a whole, which stood at 6.2% between April and June 2014.
For the past five years, student accommodation has been the biggest growing investment property market in the UK, according to The Mistoria Group. It has also continued to be one of the most robust investment sectors, with rental incomes and property values either remaining stable or increasing.
“An alternative investment to the UK’s more traditional property markets, student accommodation offers investors strong returns and this sector is continuing to see phenomenal growth,” Mish Liyanage, Managing Director of The Mistoria Group, said. “Investing in student accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties than a comparable BTL property in the same city.”
The domestic student population continues to escalate, with an extra 30,000 university places offered in 2014. UCAS are expecting an all-time high of 500,000 applications this year.
“Students will pay more for high quality, well-maintained accommodation than for the traditional rundown and neglected shared houses, because there really isn’t a big price difference between poor and high quality accommodation,” Liyanage added. “Our recent research shows us that the vast majority of students want to live in high quality, shared accommodation, with good internet access and affordable bills.”
He concluded: “Student housing is increasingly a global asset class. Over the last two years, there has been a huge surge in student housing investment activity. Last year saw over £2 billion worth of investment in the student sector.”
Mistoria offer investors HMOs, based in the North West, which they say give cash returns of 8%-10% net per annum, from day one. Also the geared yields should be as high as 35%. By contrast, Liyanage argues, PBSA yields are usually guaranteed by the developer for the first 5 years and these figures are “subject to speculation about rental increases in the coming years, which may, or may not occur.” If the property does not perform as the developer predicts, “the investor is left with an underperforming asset in year six.”
This article first appeared on Property Investor Today on 16th October 2014.