This week, Johnsy addresses the student property market and explores where the best PBSA locations are in the UK. He focuses on what purpose-built student accommodation investments we offer at Residential Estates and why we've chosen the locations for the developments.
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Please see below the full transcript of the video:
Hi and welcome to the latest Ask Johnsy. Today we’re going to look at the best locations for purpose-built student accommodation.
Now, this is very subjective and I mean I’m an agent so I’m going to tell you where I’m selling but there’s a real reason and I’ll give you a bit of background to why we’ve selected these certain locations. Previously, in the market there’s generally the student properties that everybody’s selling, every agent’s listing them and basically they’ll just pick a large city that’s a good student city, a plot of land within a few miles of the university and they’ll build and everybody will sell. That’s not the way we wanted to operate because we noticed that there were a lot of instances where student properties were being built and there really wasn’t the market for the rents. This is a supply and demand market and over the last few years we’ve seen Sheffield, Glasgow and Liverpool become over-supplied and written about in the media it’s not just me saying that. If you do a search on student accommodation in Liverpool at the moment, you will find thousands and thousands of examples. You will also notice that lots of student lets are now offering students a 42-week year as opposed to the traditional 51-52 weeks which further cuts your earnings as an investor. There’s a lot of developments out there that were promising 7-8% returns and you may get that for the first 3 years if the developer honours what he’s promised you. However, after those 3 years or 5 years whatever you’re signed up to the receiving guarantees for, it’s going to drop off significantly and that’s not something you want as an investor. So, look at the current supply, look at the current demand, look at the future potential as well. Are there investment plans? Is there likely to be growth in the university?
The biggest piece of advice that I’ve got for you in this area is to avoid the large cities. Large cities have other options. If you look at somewhere like Liverpool or Manchester, there are thousands and thousands of HMO properties. There are thousands and thousands of residential, well-priced residential developments where students can stay as well as the purpose-built student accommodation. So, you’re really into a market where you’re fighting against a lot of other people for that rental market and that’s all very well and good, if you’re in the best location, you might still get that market but it’s far better being in a market where you’re not having to fight against others for that market. Areas that we’ve noticed where this is happening is Preston, for the University of Central Lancashire and Keele which are areas that we’ve identified our hotspots for student property where there is a huge deficit, the universities are having to bus people in from outside the area in many circumstances.
So, finally, don’t just look at a market, don’t just say ‘well I’m going to buy a property for students in Manchester’, it’s a matter of micro-markets, not markets. So, you want to be in a micro-market, a particular market close to all that’s good for students. So, that’s my advice on the best locations for purpose-built student accommodation, focus on your supply and demand particularly look at where the market’s going and concentrate on that property as being just a student property, not for residential use. A lot of people go into the market and say I don’t mind a big city because if my rental market doesn’t work for students, I’ll start renting it out to the residential market. It’s never going to happen. For a start, if you’ve got students in a building, young professionals aren’t going to want to be in there. Secondly, most purpose-built student accommodation buildings are zones for student use so you can not rent them out on a residential basis. And that’s all I’ve got on the best locations for purpose-built student accommodation, thank you.
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