Property

Author: Micel Schnehage - Moneyweb.co.za

Student housing: An investment opportunity?

Long-term investors stand to benefit.

JOHANNESBURG – Property developers, investors and parents are taking advantage of a massive backlog in student housing to enter what could potentially be a lucrative investment.
There also appears to be a growing trend in the number of private investors and parents climbing on the bandwagon by buying residential units to let out to an annually growing number of students signing up for tertiary education.

This is especially true in academic hubs like Potchefstroom in the North West province, Stellenbosch in the Western Cape and Grahamstown in the Eastern Cape.

Principal of Independent Property Consultants (IPC), Monika Gaybba, says in the past three or five years, Grahamstown has seen a plethora of student developments but these have slowed down considerably. This means, however, that the town now has a healthy supply of potential student housing investments.
Gaybba says prices and rentals on student accommodation vary:

• R485 000 for a 39m² one-bedroomed unit close to Rhodes University with a rental return of around R3 800 per month;

• R800 000 for a 50m² two-bedroomed unit with an income of R6 048 per month, and

• R950 000 for a 93m² three-bedroomed flat with a rental income of around R7 500 or more monthly

Gaybba says properties in Grahamstown have increased in value over a three to five year period which means that parents have not only recovered their money from their initial investment but have saved on accommodation for their student children. “Some parents sell the units once their children leave the university and some retain their investment and purchase other property to increase their portfolios with a variety of rental options. This is also due to confidence in the local market,” Gaybba told Moneyweb.
She added that investors comprised local, national and international buyers, including the parents of students. Others included academics, business or retirees seeking a good return on their investment. “The number of rental defaulters on students is less than on other residential properties being leased as students usually have a set rental budget,” said Gaybba. Many students are allocated fixed budgets in terms of bursaries and other financial assistance.

Pam Golding Properties’ (PGP) director Boland and Overberg, Louise Varga, says in Stellenbosch there are 12 700 investment opportunities in student accommodation with 6 000 of them being in the sectional title sector. “That tells you how huge the apartment market in Stellenbosch is,” Varga told Moneyweb at the annual Pam Golding media day in Cape Town on Wednesday.
Varga says the infamous town of Stellenbosch experiences an annual “apartment season” starting largely in September through to November where owners of these apartments wanting to dispose of their assets put properties on the market and those seeking student housing put in offers, including parents of prospective students.

“If you put in an offer in September, then you have October, November, December for transfer,” Varga said. Rental renewals usually occur in the same preceding months for the following year. Those choosing to hold onto their investments can then sign new leases in December for the following academic year.
Prior to the 2008 global economic meltdown, Varga said buyers were mostly investors seeking a yield on their investment. “Right now, we have more parents buying than investors,” she added.
Asked what the rough return on investment was on student accommodation in Stellenbosch, Varga replied: “You will buy a two-bedroomed apartment very close to the campus, let’s say for R1.5m and you will only rent it out for let’s say R8 000 a month. If you go and borrow R1.5m from the bank, your bond payment will be R15 000.”

So investors hoping to make a quick buck will be out of luck. Investments in Stellenbosch properties for rental to students will need to be long term.
The average turnaround time for selling property obtained by parents with a view to getting a return on their investment is seven years. “Now if you have a child (at university) and the rent you are paying is basically just your rent and you sell that apartment after seven years, you will most probably end up with your capital growth that you’ve earned and that’s paid for your child’s education. That is why parents are still buying”.
Students going to varsity and those leaving annually is tantamount to a constant flow of supply and demand, making this market a lucrative one. What has also happened in many instances is that demand has outstripped the supply due to an increasing number of students enrolling for tertiary education. This has in some cases, certainly in Stellenbosch and Potchefstroom, led to prices skyrocketing.

Varga points out that having, for example, two offspring at varsity at the same time, could set you back R8 000 a month which amounts roughly to an R800 000 bond.

While cities like Potchefstroom have in many ways been able to expand, towns like Stellenbosch are limited because of the surrounding winelands making expansion impossible. These are factors that lead to even higher price hikes in terms of demand and supply.
A ministerial committee on student accommodation recently released a report on the growing need for housing, saying of the 530 000 scholars who registered in the past year or so, universities were only able to provide lodging for 100 000 students or 18% of those who registered.
Dawie de Villiers, chairman of MidCity which services the Gauteng region says student accommodation is turning into a niche market. De Villiers says some developers are entering into partnerships with universities like Tukkies in Pretoria and the University of Johannesburg (UJ) in providing adequate student accommodation.

There also appears to be a move away from the dormitory-like housing of yesteryear making way for so-called student villages comprising suites of three, four or five bedrooms, a kitchen, lounge and ablutions.
De Villiers says while MidCity’s developments comprise suites of between three to five bedrooms, all students have their own rooms. The studios are all fully furnished and equipped. “They just arrive with their bedding and clothes.” This type of accommodation typically costs around R2 500 a month.
Another R300m student village known as the Ekhaya Junction is currently under construction, also in Johannesburg. The project is being undertaken by Junction-S which is a joint venture between Citiq, Jika Properties and Lapalaka Developments.

It services UJ, the University of the Witwatersrand and the Tshwane University of Technology. It’s being financed by Futuregrowth, a division of the Old Mutual Group.
Junction-S director, Cornelius Mokone, says student accommodation is a growing phenomenon due to demand. In many instances traditional residences provided by tertiary institutions in the past had fallen into disrepair and were costly to renovate.
Mokone said many parents had taken it upon themselves to purchase residential units ahead of their children going to varsity with a view to letting them once their offspring had graduated. This has led to prices near these places of learning to skyrocket.
It has also provided developers and investors with an opportunity to invest in a growing market. This phenomenon is not unique to South Africa with developers in the Netherlands, for example, turning to discarded freight containers to create funky student villages.
The Ekhaya Junction is about five kilometres west of the Pretoria CBD and will house 2300 students upon completion at the end of 2014. The village will include free wi-fi, study rooms, convenience stores, eco-friendly water heat pumps, laundry facilities, cleaning and maintenance and 24-hour security.
This is very much in line with similar projects elsewhere in Gauteng. Mokone says similar to a townhouse complex, students will be able to choose between two and six-bed units with communal kitchens and accommodation in both shared and single rooms.
De Villiers says strict rules currently apply and will apply in all of its student facilities. House mothers and fathers are in charge, security is tight and troublemakers will not be tolerated.
In the education hub of Potchefstroom Jaco Faurie of RealNet Properties says student housing, which comprises mainly units in complexes near the North West University which is situated in The Bult precinct, vary in price range with those closer to the place of learning being far more expensive than those on the outskirts of the university.
Faurie says the more luxurious units have been priced at around R18 500m² while the less lavish ones have been evaluated at R14 000m².
He says investors have shown a keen interest in acquiring student accommodation as there is still room for growth: “…an older two-bedroom unit selling for R665 000 will quickly draw tenants a monthly rental of around R5 000. An investor who paid a 20% deposit would thus comfortably cover his bond of about R4 600 per month and the monthly levy of around R350 with his rental income.”
Property and development company, Aengus, says it has a rapidly growing portfolio of student flats in Johannesburg, Durban and Port Elizabeth that is has created largely by refurbishing existing mothballed office blocks. Rentals for Aengus flats range from R1950 to R2500 per student, per month for 10 months of the year.

A higher education ministerial report on student accommodation has called on universities to enter into partnerships with the private sector to address the current shortages in metropolitan areas. Developers and investors are doing exactly that.
The report says there is definitely a gap in the market for safe, secure and affordable student accommodation close to university campuses and other academic precincts.

Author: Kentse Radebe  -  Moneyweb.co.za

14 January 2013 12:43

The pitfalls of private student accommodation

Catering for the lower end of the market presents significant challenges.

JOHANNESBURG – The increase in the demand for student accommodation has been beneficial for private property investors, particularly as the majority of students in private accommodation are funded through the National Student Financial Aid Scheme (Nsfas), administered by universities. However, Marius Minne, CEO of South Point properties, one of the largest private accommodation providers, argues that the funds are neither enough nor consistent.

South Point caters to over 90% of students who are on Nsfas.
Providing decent accommodation at an average price of R2 500 a month with rising maintenance costs for the lower end of the income earning segment of the market is nearing the impossible. In 2012 Wits University had 950 students who were on Nsfas and living in private accommodation. Wits allocated R19 000 a year per student towards private accommodation. At the University of Cape Town (UCT), 535 students were on Nsfas in 2012. The Nsfas allocation at UCT amounted to R11 400 per student but was topped up by UCT to R20 400. Both universities have existing relationships with private accommodation companies such as South Point and Aengus Properites, among others. As such, students must choose from accommodation offered by these companies or funding will not be provided.

The Nsfas allocation is falling short by about R4 600 and R6 000 a month. At the Durban University of Technology, students on Nsfas living in private accommodation are not funded, as the university has no control over accommodation. The shortfall is left for students to cover; according to the Ministerial handbook student’s personal accommodation debt stood at R85m in 2010.
Which leaves property companies in a conundrum.

The rising cost of maintenance is placing South Point’s profit margin under immense pressure says Minnie. The conflict for South Point currently is providing adequate housing for poor students whilst the demand for student accommodation continues to rise and push up prices. As accommodation costs rise, poorer students will increasingly find themselves in tough competition with those who can afford to pay for the cost of accommodation.

Pieter Bezuidenhout, a consultant at Seeff properties, estimates that student accommodation prices in Pretoria’s Hatfield can range from R2 800 to R4 500 per month. The reason behind the rising price increases, Bezuidenhout argues, is because prime space held by property companies catering to students is in high demand. Young working people are also competing for this accommodation because of its easy access to Gautrain routes.

South Point’s largest presence is in the Braamfontein student hub which provides quick access to transport services such as the Rea Via Bus Rapid Transit System, the Gautrain bus routes and taxi ranks within walking distances. The potential for catering to young working people is also growing says Minnie, but South Point currently only has one building catering for young working adults. The Department of Higher Education’s Review of Accommodation Handbook in 2012 revealed that the University of Johannesburg, Wits and UCT have limited land for development and that private public partnerships would be the only solution.

According to the ministerial handbook review the majority of student growth in the future is expected to come from poorer students. Private student accommodation property companies like South Point are one of the few that provides affordable housing for students. Universities alone cannot meet the rising demand for student accommodation. Robert Sherman, head of campus housing and residence at Wits University, expressed a similar view when he stated that Wits aims to cater for only 35% of its student populace.
Students who cannot keep up with costs will be forced to live further away from universities, depend on other transport means to get onto campus or seek alternative income to pay for the shortfall, Bezuidenhout said. Minnie argues that because of the important role that private accommodation plays, special dispensation needs to be considered for the sector because universities alone cannot provide accommodation for all its students.

SA investros cash in on student homes

SA investors cash in on student homes

Property 24

17 Jan 2012


A shortage of student accommodation at universities and tertiary institutions has seen old office blocks being turned into upmarket student homes.

Johannesburg has seven properties located right across the road from the University of Witwatersrand and will take 934 students.

The shortage of student accommodation and funds to build new residences has led some universities in Johannesburg, Port Elizabeth and Durban to outsource their accommodation to private developers and building managers, says Richard Rubin, chief executive officer of Aengus Property Holdings (APH).
He says there is an ever increasing investor appetite for this type of housing and the private sector is in an ideal position to step into the breach.
APH is known for its inner-city regeneration projects, urban renewal and a new wave of fashionable inner-city living.
The developer is one of the leaders of affordable yet upmarket accommodation within the city centres across the country converting old office blocks into upmarket accommodation for university students.
Rubin says according to the Department of Higher Education statistics, out of a student population of 530 000, there is currently only enough student accommodation for 100 000 students, meeting just 18 percent of the demand.
The department says the lack of supply of student housing is the primary cause for poor performance and high dropout rates at some universities, with students forced to live in conditions not conducive to studying, he says. 
“Accommodation costs are also pushing university out of the reach of many disadvantaged students as rent eats up a major proportion of their monthly budgets.”
After piloting their successful student accommodation model in Johannesburg with 10 buildings, APH has purchased and converted 11 additional buildings in Johannesburg, Durban and Port Elizabeth into high quality student apartments.
He says a number of transactions spanning Johannesburg, KwaZulu-Natal and the Eastern Cape have been concluded adding that student accommodation is breathing new life into South African city centres.
Rubin explains that from the 11 properties, three are in Greyville Durban and will accommodate 183 students.
Central Port Elizabeth has six properties and will accommodate 482 students and Johannesburg has seven properties located right across the road from the University of Witwatersrand and will take 934 students.
Rentals in these types of properties range from R1 950 to R2 500 per person depending on the offering.
In Braamfontein Johannesburg, Aengus is already offering 1 000 new beds for 2012, he says.
Rubin says this is a growth market based on Higher Education Minister Blade Nzimande’s plans for growth to tertiary catered students.
He says if there were investments for sale (none of the students units in the Aengus Investment Properties buildings are currently for sale), investors need to make sure they are well run and located close to tertiary institutions.
Jaco Rademeyer of Jaco Rademeyer Estates says their main student accommodation is in the Summerstrand area in Port Elizabeth close to the Nelson Mandela Metropolitan University.

The developer is one of the leaders of affordable yet upmarket accommodation within the city centres across the country converting old office blocks into upmarket accommodation for university students.

Rademeyer says savvy investors buy property in this area close to the university and rent out per room with rooms costing up to R2 000 per month.
An investor in this case then earns income of R6 000 on a three bedroom property whereas a normal rate would have been about R4 500 per month.
He says people create extra rooms from garage spaces to earn more income.
Furthermore, he says January and February are generally busy months when it comes to student accommodation with many students opting to share a house, townhouse or flats and mostly looking for furnished accommodation.
The average price range that students are looking to pay this year is between R1 800 to R2 500 per student per room.
With the majority of students using public transport, the popular locations are Humewood and Summerstrand.
He says Humewood has mostly flats and students share these while Summerstrand has mostly townhouses and a variety of garden cottages.
“Student accommodation is very popular and there are plans of doing a whole student village very close to the university at the moment.”
Durban North is currently experiencing a fairly good demand for student accommodation because of Varsity College and Sharks Academy in the area.
According to Grant Gavin, broker/owner of RE/MAX Panache, student accommodation on offer varies from a converted house often with out-houses converted on the property to granny flats on existing properties to luxury homes booked up a few years in advance.
Closer to Durban, around the Durban University of Technology, there are large blocks of flats such as Bryanston Heights where two and three bedroom flats are being used as student digs.
Quite often the lounge is converted into an extra bedroom and the cost per bed is kept down, he says.
Asked about rentals, he says as an example, in Bryanston Heights, students can double up in a room from R900 per month and for own room upwards the cost is R1 200 per month.

Rentals charged on modern, well finished apartments in prime locations range from R3 300 for a one bedroom flat, according to Engel & V?lkers Potchefstroom

In Durban North, the bottom end accommodation costs around R1 500 per bed per month, granny flats between R3 500 to R4 000 and luxury accommodation often inclusive of meals (although limited) to R3 000 per bed.
“For a residential property owner looking at additional income streams from their property, this does provide a good option.”
We are seeing more investors buying a property with the specific intention of converting the house and outbuildings for student accommodation and the property then becomes a cash positive investment – something you very rarely attain on a normal residential property, says Gavin.
He says investors of this type of housing should have somebody living on-site to manage/supervise what goes on at the accommodation.
Students enjoy the good life and it is therefore important that the landlord takes responsibility to ensure that there are strict rules in place for noise levels and unruly behaviour, particularly given that these properties are located in residential areas.
It’s probably also advisable to contact somebody at the council to ensure that the number of students living at the property is approved correctly, he says.
In Bloemfontein, the University of the Free State (UFS) and Central University of Technology (CUT) campuses does not have enough student accommodation.
CUT students live mainly in Willows which have over the years become predominantly a student area and many families have moved out, according to Mike Spencer, owner at Platinum Global.
He says UFS students tend to live in Brandwag, Universitas and Westdene and tend to be economically better off.
Bachelor flat accommodation has been snapped up and normal one or two bedroom flats are virtually unobtainable.
A new building was constructed outside the UFS campus and will eventually have about 370 fully furnished two person apartments at Unilofts, he says.
Spencer says the Free State Province believes that there is a shortage of about 2 000 student flats.
This year has seen a well publicised increase in the number of students and this is on top of the 1 000 extra students at each university last year.
“Rentals continue to increase at about 10 percent as they have done for some time,” he says.
At Willow Glen, bachelor pads are now priced at R2 150 from the beginning of the year and Unilofts R5 500 per month.

Rentals charged on modern, well finished apartments in prime locations range from R3 300 for a one bedroom flat and student units are 100 percent occupied and investors enjoy capital growth as new buyers and tenants come to the city annually, says Venter.

Investors in this housing sector cannot go wrong as there is demand for student accommodation.
He explains that as for the disadvantages, CUT students that mainly come from Lesotho require affordable housing and cannot afford unrealistic rentals.
“Investors have to make sure that the returns make it worth their while and need to factor in the high levies, high maintenance and vacancy factors in their pricing.”
He says Bloemfontein has no forward town planning for building student accommodation meaning there is no zoned ground.
The CUT has a major problem because it is situated in the built up city centre with limited opportunities for acquiring ground to build new hostels/blocks of flats.
He says although UFS has a similar problem, many of the students come from better off families and have their own transport, which gives more of a choice unlike CUT students.
Engel & Volkers reports an influx of investors into student housing In Potchefstroom, says Carl Venter managing director of Engel & Volkers Potchefstroom.
Venter says they are currently marketing a few well designed student housing developments in prime locations and investors from across South Africa are keen to invest in a good quality product with great returns and steady capital growth.
Developments in the area include Carmen, Ivy League, Annes Garden and Botanika.
Botanika and Anne’s Garden Two will be ready for occupation in March, Carmen at the end of 2012 and Ivy League will be completed at the end of 2013.
The agency’s property sales for 2011 revealed that 25 percent comprises student accommodation, 20 percent commercial and 55 percent residential.
“Buyers are parents buying for their children studying at the North West University and investors.”
Rentals charged on modern, well finished apartments in prime locations range from R3 300 for a one bedroom flat.
These student units are 100 percent occupied and investors enjoy capital growth as new buyers and tenants come to the city annually.
He says demand for student housing this year is peaking at a 5 year high.
In the Western Cape, Pam Golding Properties (PGP) rentals manager Dexter Leite says there are two areas that are in demand for the University of Cape Town (UCT) students and City Bowl with other student accommodation coming from Cape Technikon, AAA Advertising School and Boston City School.
They look for two bedroom apartments to share with both parents invariably signing the lease as this is generally a cheaper (and considered safer) option than a one bedroom unit for one person.
Security, safety and secure parking are paramount concerns for students and their parents with many choosing newer developments, with mixed residential and retail components which offer an appealing lifestyle.
“Demand starts in October each year, peaking in November and December with enquiries continuing through January.”
Asked about property returns, he says gross returns on average are around 5 percent, whether for student accommodation or other tenants, in similar rental categories.

Inside one of the student units provided by Aengus in Johannesburg.

He says almost all the units they let to students were not purchased specifically as student investment accommodation, but were bought as investment properties.
In the Southern Suburbs of Cape Town, rentals range from R4 500 to R5 500 per month for a one bedroom unit with one parking bay to between R8 500 to R10 000 per month for two bedrooms with two secure parking bays.
Leite says there is demand across all rental price categories in the Southern Suburbs and City Bowl areas depending on affordability and the student / parents’ specific requirements.
Overall, demand for student accommodation in these areas outweighs supply, he says.
He says the The Quadrant (Claremont), Mont Clare (Claremont), The Claremont (Claremont), Intaba (Claremont) Albion Place (Newlands) are very popular with students.
In City Bowl, bachelor apartments are priced from R4 000 to R5 000 per month and one bedroom units from R5 000 to R6 000 while two bedroom units cost between R6 500 to R8 500 per month.
Popular developments in the area include Mutual heights in Darling Street, St Georges (Strand Street), Wembley Square and Perspectives (Roland Street).
PGP Stellenbosch area manager, Louise Varga says buyers of student apartments are parents and investors.
Parents normally buy an apartment and keep it for around six years on average.
As an example, Varga says a parent who bought a 65 square metre, two bedroom unit in Andringa Steet for R825 000 in 2004.
When both the children completed their university studies six years later, the unit was sold for R1.4 million in 2010, which equates to an annual growth of 9.82 percent. 
“I believe we have this steady capital growth due to the fact that every year we have parents selling and parents buying.”

A new development on campus, Andringa Walk will make an excellent investment with rental income of R4 000 per room. These units are priced from R1.4 million to R3.350 million with an average price of R1.940 million.

Varga says in Stellenbosch, they have always had more student parents buying compared to buy-to-let investors.
On campus we currently will rent out rooms for R4 000 while a two bedroom apartment can achieve R8 000 per month and bachelor apartments at R4 500 per month, says Varga.
She says they recently sold a two bedroom unit in Merriman street for R1 750 million (54 square metres with two basement parking) with a return of 4.6 percent in the first year and this increases annually.
“On average the rental increases around 10 percent per annum and over a period of five years the recent past has proved a capital growth of 9.8 percent per annum.”
A new development on campus, Andringa Walk, will make an excellent investment with rental income of R4 000 per room.
These units are priced from R1.4 million to R3.350 million with an average price of R1.940 million.
She adds that this is an ideal buy for any parent compared to simply paying rent and getting nothing in return. – Denise Mhlanga

Student Digs will beat commercial property

UK real estate forecast: 5% for student homes, almost zero for office blocks.
Knight Frank forecasts continued rental growth in student accommodation sector

Highlights

Rental growth in the student accommodation sector remains robust, recording growth of 5% per annum over the last six years, compared to 0.6% for commercial property. Substantially higher growth was achieved in key university towns over the last academic year.

Demand for university places continues to rise. Preliminary figures suggest a further increase in demand for places in the 2010/11 academic year, with UCAS reporting a 12% rise in applications at its October deadline.
As an asset class, the student accommodation sector is maturing and becoming recognised as an important element of the wider property investment market. Since mid 2009, there been increased demand for secure income producing assets and demonstrable yield compression.

Source: realestateweb

Should I be a student landlord? UK

Posted by Catherine Deshayes on Wednesday, August 19, 2009

Many large portfolio landlords have started as student landlords letting their property to hoards of marauding students. The question for many parents of students looking to go to university this year or other property investors or landlords is should I join the ranks of student landlords?

Growing student letting market
There is no doubt that the student letting market continues to buck the trend in other areas of the economy. The resulting down turn has resulted in record numbers of students applying to enter higher education this year.

The latest figures show that application for degree course are up by 57,000 on last year as the economic downturn results in many students putting off work or ‘upskilling' in an attempt to avoid the dole cue.

According to Knight Frank the UK student population has grown consistently over the last 10 years. Total student numbers have grown from 1.8 million in 1997 to 2.5 million in 2007. Savills expect this to hit three million full and part time students by 2014.

Growth has been driven in the main by domestic UK undergraduate demand. However, there is a trend to rising numbers of foreign student, with participation of overseas students at UK universities rising 67 per cent over the past decade.

Knight Frank research shows that in 1997 they accounted for 11 per cent (international students) and 21 per cent (postgraduates) of all students; by 2007 these figures had increased to 15 per cent and 24 per cent respectively.

Both international students and postgraduates are more likely to opt for purpose built private student housing rather than shared houses. Foreign student numbers are expected to grow from 15 per cent of all students in 2008 to 21 per cent by 2018.

Knight Frank in their Report produced this year estimated that London alone requires an additional 100,000 student bedspaces.

Student lettings niche letting market
Letting to students is a very niche part of the private lettings market requiring particular skills and an approach. It's more complex and potentially involves the landlord complying with a greater deal of regulation than a standard buy-to-let.

This is because many student lets will be classed as a house in multiple occupation (HMO). Landlords letting certain types of HMOs are now required to be licensed by their local authority. In order to obtain an HMO licence landlords will have to meet certain fire standards and accommodation standards that can be expensive to comply with. For example this can often involve having a newly installed fire alarm system and fire escape costing tens of thousands and also potentially taking value of the property because of it would then be no longer attractive to the owner occupier market.

Therefore for many first time landlords they should avoid investing in a property that is a potential HMO. The easiest way around this is to ensure that they only let their property to 4 or less student tenants as a rental property can only be classified as a HMO if let to 5 or more tenants.

In addition, student lets require a greater amount of supervision and management input. This is because student properties have a greater turnover of tenants than many buy-to-let properties occupied by professional tenants.

In addition many student lets will be required to be furnished. The level of furnishing is often specified by the university and landlords will need to comply with standards set out by the student accommodation office in order to be featured on the universities accommodation list circulated to many students looking for accommodation.

Students can make good tenants:
A student landlord can fit more student tenants into a property. A 3 bed house will frequently accommodate 4 sharers - and that's without letting the cupboard! This is more intensive than a let to a single tenant or even a house of professional sharers which can have a potential benefit on the investment yields.

Student tenants aren't quite as fussy. Students particularly undergraduates have tended not to be as fussy as professional tenants. These type of tenats are more prepared to put up with slightly outdated kitchens and colourful bathroom suites than design conscious professional tenants.

However, landlords shouldn't be complacent; with the advent of more and more private halls standards are rising and mature and foreign students often demand professional levels of accommodation.Student tenants sometime pay rent in advance.

Some student tenants or more accurately their parents will often pay upfront for each semester or term. This is handy for a landlord as they have the rent in advance with which to pay any mortgage or other costs.

Student tenants are bright. This in theory makes dealing with them and sorting out problems easier. Catherine Bancroft-Rimmer, author of The Landlord's Guide to Student Letting comments "You do get exceptions," "but once you've explained why you need them to do something they are usually quite willing to go along with it." From my experience there is nothing worse than trying to resolve a problem with a thick tenant. The phrase "like pulling teeth" comes to mind.

Student rental accommodation supply
There is no doubt that in many areas supply of rental accommodation by student landlords has failed to keep up with demand. This is especially true in London where a recent report by Knight Frank highlighted a shortfall of 100,000 bedspaces in London alone. However, like many aspects of buy-to-let investment the fundamentals of any market are essentially local.

Therefore a prospective student landlord should ensure that they do their own local research by talking to local rental agents and University Accommodation Offices before factoring in their expected rents to their investment calculations.

The competition amongst student landlords renting to students in some areas is a very strong. Some areas are already oversupplied according to Simon Thompson Director of Accommodation for Students.

"Leeds is quite overpopulated with student accommodation, as are the Fallowfield and Withington areas of Manchester."

Universities and increasingly private developers are constructing purpose built halls of residences. These aim for the top end of the market but none the less it is worth a landlord talking to the local planners to find out what is in the pipeline.

Student rent levels
The strong demand for student lettings and the shortage of supply has resulted in rents growing 10per cent in London where the shortage is particularly acute as London is the premiere centre for student accommodation in Europe with over 40 universities. In the rest of the UK rent level growth was less strong growing by only 8 per cent but still outpacing the rest of the residential investment market where rents actually fell by almost 2 per cent over the last year according to the Rentindex.

The latest figures on student rents released by accommodationforstudents.com, the UK's No 1 student accommodation website, reveal that the average UK weekly student rent continues to rise. At £62.40, their figure is up 1.5 per cent on last year and 19 per cent on the comparable figure five years ago. AFS figures are based on rents from over 51,000 properties across 75 cities in the UK and includes figures from purpose built student accommodation and private landlords.

The ideal type of property for a student landlord
Student tenants generally prefer to go into Halls for the first year after which they then look for accommodation in groups of 4 or 5. Our research shows that different student groups have varying accommodation requirements.

Post graduates for instance frequently prioritise a peaceful working environment and their demands are very similar to that of professional renters. Undergraduates are more likely to request accommodation located close to entertainment facilities and town centres and are more willing to live in larger shared properties.Location is often a key factor. Students like to be near each other. Chris Horne Editor of expert landlord website Property Hawk says, "If you can find out where the ‘cool' bars and places to hang out are; then a property close by will definitely have a marketing advantage. Essential is that your property has good access by public transport to the University campuses as well as the night life and basic shops and services. Not all students have cars!"A three bedroom property is probably ideal. This is because with a little bit of work, it should be possible to convert one of the ground floor rooms to an additional bedroom thereby allowing you as the landlord to accommodate 4 students. If you provide accommodation for 5 or more students, then you will very likely have to obtain a licence for your property as a House In Multiple Occupation (HMO).

This in itself is not a disaster in that it will probably only cost a couple of hundred pounds from the local authority. However, what could be more difficult is that in order to obtain the licence the Local Authority may insist on certain minimum standards in the property. Examples of this are sinks in every bedroom along with other expensive fire safety measures.

These works will not only be costly but potentially they will detract from the attraction of your property to the owner occupation market when you come to sell. To avoid this most student landlords are best advised at looking to keep the maximum number of student renters to 4. The exception to this might be where a landlord was looking at making it into a more involved commercial undertaking in which case buying an already licensed HMO would probably be cheaper and make more sense.Victorian terraced properties often provide ideal accommodation for a student landlord because of the generous room sizes. Large spacious rooms are particularly appealing to students as these are often more than just a place to sleep. In theory they will be places of study and also their private space to retreat to when all the partying and communal living gets too much! Landlords should therefore look for properties with 3 generous double rooms and one living room that can be converted to this.

Insuring your student rental property
Insurance is also an issue. Finding the right landlord insurance is essential as not all insurance companies are keen on student tenants and they may impose higher excesses or charge higher premiums where students are involved.

It is absolutely essential to ensure that a landlord insurance broker is fully aware of the position if you let to students. This is because many insurers consider that the type of tenant to be a "material fact". This means that if there is a claim and you have not disclosed this, they can quite legitimately seek to repudiate a claim.

Written by www.propertyhawk.co.uk

Recession boost for student towns

University cities defy property slump as new graduates snub tough jobs market, reports Hilary Osborne

The Observer, Sunday 2 August 2009

The recession has had a big impact on the property market, but one sector appears to be benefiting from the downturn. Demand for student digs is rising due to an increase in the number of A-level students going on to further education and new graduates snubbing the jobs market in favour of a higher degree.

"Undergraduate [course] applications rose 9% in the 2008/09 academic year and are forecast to continue growing," says Lucian Cook, director of research at property firm Savills.

"Postgraduate numbers are expected to see a similar surge in response to weakness in the jobs market. Purpose-built student accommodation has failed to keep up, diverting students into the private rental sector where they compete with aspiring first-time buyers."

This is the case at the University of St Andrews, on the east coast of Scotland. Local estate agent Ian Morton, a partner at Bradburne & Co says the university saw a surge in numbers last September and this year could be equally busy. "People are not taking gap years because they realise it is hard to get a job," he says. "Last year there was a major shortage of accommodation and the university had to rent from the private sector."

Rents are high - top digs fetch £500 a month, a room - so investors and parents are still keen to buy, paying around £150,000 for each lettable bedroom.

Scottish government figures for the wider area of Fife show property prices are down just 0.8% year on year, against a fall of 4.4% in Edinburgh.

Prices are also holding up in the student areas of Nottingham, according to Paul Perriam, area director of estate agent William H Brown.

"The core student area is Lenton. It is primarily Victorian terraced houses which are now almost entirely given over to student accommodation," he says. "Prices have held up really well - they have come down, but not to the extent of the general market." According to Perriam, a room in a good property can attract £75 a week .

In Canterbury, Mark Weller, an area partner for Connells, says several investors have added five or six student homes to their portfolios this year. "Properties suitable for student buy-to-lets are selling quickly, particularly three-bedroom semi-detached and end-terrace houses, that can be extended or converted in some way to produce four- and five-bedroom properties," he says.

But there are signs the general slowdown is having some impact, even in St Andrews. Morton says some parents who had planned to sell up as soon as their children left university have opted to hold on to property while they wait for an uplift in prices.

In Norwich, where students at the University of East Anglia flock to an area called the Golden Triangle, Joanne Pennells of haart estate agents says fewer properties have come back on to the market than in previous years.

Just as the student property market has specific drivers, it also has its own threats. One problem is that universities are creating more accommodation for second and third-year students.

In Durham, building by the university has led to a fall in demand from investors and parents, says Geoff Graham of estate agent JW Wood. "There seems to be a bit of an oversupply," he says. "Landlords have been finding they can't get tenants, or where they would have five in a house they are now getting three or four, or the rents they can get are lower."

Another potential problem in England is proposed changes to the rules on houses in multiple occupation (HMOs), which form part of a government consultation set to close on Friday.
The change, designed to reduce the "studentification" of large areas of towns, would force anyone letting a home to more than three unrelated people to get planning permission to make their property a HMO - now this only applies if there are six or more tenants.

Giles Ferin, a planning specialist at law firm EMW Picton Howells, says it could have a serious impact on the property market if the government adopts the proposals. "A lot of parents buy properties for little Jimmy or Jenny to live in while at university, and rent rooms to their friends to cover the mortgage costs ... this would potentially scupper that. If the number of people you need to cover the mortgage is going to be your child, plus more than two others, you are going to have to get planning permission."

This will add extra cost and time for the first set of people converting these properties and will mean they can't go back on to the market as regular homes. It's by no means a done deal that the rules will come into force. But if they do, they could be a bigger concern in many university towns than the recession.

Students fuel rental demand

Denise Mhlanga
07 January 2009

Residential letting agents get set for bumper season, as demand for student accommodation in some areas outweighs available supply.

Estate agents in areas located close to universities and other higher learning institutions say 2009 should be a good year, with high demand for student accommodation already being experienced.

A week into 2009, already some 400 university students in Johannesburg have secured accommodation outside of campuses and the number is set to increase come February when universities open.

That's according to Richard Rubin, chief executive officer of Aengus Property Holdings. He says there is huge demand for accommodation in Braamfontein and surrounding areas and limited supply.

Students renting out properties during the year include local and international students, the latter largely from the African continent.

"Since we opened for the year, already we have taken 400 students for the available properties," he said. He said January and February are always the busiest months in the year and students sign leases of 10 months.

Basically, the student market is the best place to be as there is guaranteed rental income for 10 months and when students like the places they rent, they usually renew for the following year, according to Rubin..

Asked about rentals, he said they range from R2 000 and R2 500 a month with two students sharing in most cases. "This is a good part of the market and investor returns are far better than the residential property market," said Rubin.

Daphne Timm, principal of Pam Golding Properties in Grahamstown, said Rhodes University and schools in the area have generally always kept the residential market going.

Despite new developments in the area, there is never enough student accommodation available.
"The student property market is definitely buoyant - just not enough stock to meet demand," said Timm. Rentals range from R1 500 and R2 200 for a room.

In some parts of Cape Town, parents sign annual leases for their children. Some are prepared to pay as much as R8 000 per month on rentals for upmarket apartments. Kevin Crassord, estate agent at Just Letting Atlantic Seaboard, said student rentals make up about 5% of the total lettings, though offerings on this side of Cape Town and they tend to be very expensive compared to student accommodation elsewhere. Average rentals are between R7 000 and R8 000 a month and the cheapest accommodation is R5 000 per month for a one-bedroom apartment.

Fred Johnson, estate agent at Tyson Properties Westville, Durban, said as universities keep expanding demand for accommodation will be continue to pick up. He said, in Westville, there are small rooms priced at R1 800 a month, while upmarket student accommodation costs from R4 500 per month. The granny flats in most areas are used as student accommodation and as long as they are priced right and suit students' lifestyles, they would be rented out.

"The student market is doing well, and prices are steady with a good supply of accommodation," said Johnson.