Plunging into the student real estate sector

student housingBritish mortgage experts are arriving at a conclusion that the most profitable housing rent in the country accounts for students. The average yield of this property is 12% per annum. This high figure is due to several reasons. Firstly, as in other countries, British students often rent rooms, not entire apartment. The owner gets more profit when providing each room for rent separately. Secondly, in the UK there’s too few student dormitories to accommodate everyone. For example, in 2010 to 490,000 of beds at the dorms were provided to as many as 700,000 of students. Thirdly, education in the UK is becoming increasingly popular among foreigners. The number of international students increases year after year, so the demand for housing rental grows accordingly.

The most popular cities for students remain to be Durham, Cardiff, Birmingham, Liverpool and Nottingham, all of the above having the same feature – a relatively low cost of housing at a high yield. In the past few years the industry is booming: according to CBRE’s, in 2011 sales in this segment of the UK market amounted to £863ml., while in 2010 this figure was equal to £93ml. In 2012, the growth continued and exceeded £1bn.

The total investment in the student’s real estate sector in the UK has exceeded £2 billion in the second year: according to the agency CBRE in 2013, the size of investment in the sector of commercial real estate has reached £2.1 billion. Unlike most other real estate sectors in the UK, student apartment sector is experiencing an investment boom in the regions outside of London. Thus, from the total amount invested in the sector in 2013, 88% of the share accounted for objects outside of London – 30 regional centers of the United Kingdom. Such cities as Coventry, Swansea and Manchester have received the greatest share of investment, because of the opportunities for implementation of large-scale projects with high rental income and strong demand for student housing for rent.

According to the reports of conveyance solicitors, over the past 2 years there was a significant increase in the number of foreign investors attracted to the sector. So, while in 2011 the share of investors from abroad accounted for only 23%, then in 2013 already this mark has increased up to 52%. The most prominent group of investors includes the residents of the United States. For example, the Greystar Company, one of the largest operators of student property and homes for rent in the United States, has acquired a portfolio of student hostels in England estimated at £310ml.

The basis for the increased interest in the sector of student hostels in the UK is the fact that the current market cannot satisfy the demand to the full extent. Despite the skyrocketing tuition fees, we see an increase in the number of students in the UK, and in particular, students from abroad. Those foreign students prefer to live in comfortable complexes of student hostels, rather than in the private sector. For example, in the 2013/2014 academic year, the number of foreign students admitted to British universities accounted for 61.985 individuals, the highest rate since 2010. As a result, the percentage of load on many hostels exceeded 95%, guaranteeing stable income and attraction of new investors in the sector.

The state of affairs around rental and new buildings market in the UK

real-estate-investmentThe number of people renting apartments in the UK has increased from 2.15 million in 2004 to 3.35 million in 2010, which accounted for a 55% increase over the 6 years. This is primarily due to the high prices of housing and the reluctance of banks to lend money for acquiring housing. This situation leads to the fact that there is a significant increase in rents, which in turn increases the return on investment in the purchase of further property rental trend. According to a recent survey conducted by a number of the UK’s leading real estate agencies and company, aggregating conveyancing solicitor and allowing you to find a solicitor effortlessly, every tenth rented house in Britain in 2012 generated at least 10% of income, and the average yield across the country amounted to 6.2%.

The amount of foreign buyers in the UK property market is dramatically increasing. And while a decade ago the presence of wealthy foreign buyers in central London was the norm, now greatly increased the number of foreigners acquiring more affordable business-class housing in all areas of London and beyond. Currently, the share of foreign buyers in new buildings varies between 40 and 60%. These are mainly buyers from Asia, namely, China, Singapore and Hong Kong, CIS and Arab countries residents. Also, because of the sovereign debt crisis increased the flow of buyers from Southern Europe. In 2011, the value of real estate purchased by foreigners in London was estimated at £5.2 billion, exceeding the analogous index of 2010 to £1.5 billion to put London in the first place in the world.

High return on invested capital, is only one reason that London is a world leader in foreign investments in real estate. Perhaps more important is the fact that, historically, London has always been a “safe haven” for foreign investment in real estate. Customers who invest in real estate in London, considering their investment not only in terms of the real estate, and much more broadly: the rule of law, stability of power, leading the educational system, the rich culture, tradition and heritage contribute to a reliable accumulation of wealth.

A recent study by the University of Oxford revealed the rise in prices in central London is directly related to the growth of instability around the world. Thus, London real estate has become a delicious piece of pie for many wealthy investors looking to protect themselves from inflation.

London is a global brand; and not many cities can compete with the city in terms of infrastructure, level of life and business development climate. Even if alternative real estate markets exist, comparable with London on the level of openness and transparency, they are very not numerous. Investments in real estate of England and London in particular are now fairly considered to be mid and long-term investments. The combination of qualitative characteristics of London as a financial center (the financial center at least in Europe, comparable to the largest regional centers – New York and Hong Kong), legal, political, cultural and social hub, standing out with dynamically developing, reliable infrastructure and a particular urban landscape, just instill confidence in the fact that the status of London as a safe haven doesn’t raise any questions.