Despite the fact that the UK's student accommodation sector is booming, one investment firm says landlords should be aware of the potential risks of investing in student rental properties.
The Mistoria Group says there are pitfalls that come with letting student rooms that landlords need to know. Recently, real estate firm Savills revealed that £5.8 billion was invested last year in student accommodation, with major private developments being created in city centre locations.
Some of these high-spec private residential halls for students include en suite rooms and flat screen TVs with the promise of a luxury experience. In their report, Savills says that the private sector now provides 41% of homes for students in the UK, up from 18% in 2006, with the average rent now standing at £147, a rise of nearly 20% since 2012.
Student numbers set to rise
And with student numbers set to rise in the coming years, there's also a rise in student numbers from EU countries too. Mistoria's managing director, Mish Liyanage, said the rooms, also known as student pods do bring opportunity, but also risk.
He explained: “The big disadvantage for student pods is their capital growth potential and resale value. The property's value will fluctuate and the number of potential investors is small compared to those for other types of student rooms such as flats or HMOs.”
Landlords with a buy-to-let student property
He added that landlords with a buy-to-let student property can sell it at any time on the open market and expect reasonable capital appreciation from rising property prices, but the situation with selling a student pod is not the same.
He says that establishing a market value is difficult, as there's no established resale market and potential investors should also be wary of developers offering guaranteed returns of around 7% a year since the promise is only as good as the company offering it.
However, Mr Liyanage also said: “Despite these pitfalls, student property is a profitable asset with robust returns with an attractive return on investment and investors can apply to remortgage and there's a strong market for student property.”
Lack of DIY skills blamed on landlords
Meanwhile, a sharp drop in the number of under 30-year-olds who carry out DIY work on their homes has been blamed on buy-to-let landlords.
Credit card firm MBNA says the reason is because tenants cannot afford to buy their homes or fix them up either, and DIY spending by under 30s has fallen by a third since 1995.
A spokesman for the firm said: “Generation Rent cannot usually make home improvements because of their tenancy agreement.”
