Annual Student Property Report

A continuing positive outlook for the student property market and some interesting trends coming to the fore in 2014 are two highlights from the latest Knight Frank annual report for the UK student accommodation sector.

Over the next 12 months, Knight Frank anticipates rental growth of 3% in London and 2.75% in the regions, with investment returns stabilising.

Buoyed by a projected rise of 3% in the number of full-time students, and a structurally-undersupplied market, the sector is now seeing interest from a wider-than-ever range of investors, including US and Middle East equity sources.

Knight Frank has measured the difference in rents for the first time, finding those for purpose-built student accommodation (PBSA) are up to 75% higher than for HMOs in Oxford and Newcastle, and 56% higher in London;

The Knight Frank Student Index shows London rents are up 1.73% year-on year in the 13/14 academic year, while blended regional growth is 1.59% – a solid performance given the recent introduction of tuition fees;

Studio rents have grown marginally more quickly than rents for “en-suite” cluster flats. Students in London currently pay an average of £299/week for studio accommodation;

Average total returns for the year to September 13 were 7.8%; student property outperformed all other traditional commercial asset classes;

The start of this academic year saw all core UK markets effectively fully-let;

There are currently over 13,000 student bedrooms planned or under construction in London; however Knight Frank believes the future pipeline will be squeezed by the introduction of CILs;

The cities with the lowest supply of PBSA include Bath, Brighton, and St Andrews.

The sector’s performance track record has been underpinned by a lack of good-quality student housing in almost every market, and an increase in students demanding a “lifestyle” element to their accommodation.

The report finds there are clear opportunities for providers to add value through both design – including refurbishment of existing stock – and intelligent branding. This element of the sector has until now been overlooked, and student accommodation brands have a low level of recognition among students. By increasing awareness of their brands, providers can target specific market segments and achieve higher returns. Knight Frank also expects there to be some consolidation of operators in the management sector in 2014.

Confidence in the sector is evident, and demonstrated in a simple way by the schemes currently taking shape. There has this year been a trend for increasingly tall developments, some as many as 35 storeys.

Landlords Mortgage Costs To Rise

A buy-to-let lender has written to 6,700 borrowers– one quarter of its entire landlord loan book – telling them it will be hiking their rates by 2% this December.

The move has evoked fury, with concerns that the extra costs will simply be passed on to tenants in the form of higher rents.

The West Bromwich Building Society is targeting the hike at ‘professional’ landlords only – those owning three or more properties – on ‘lifetime’ tracker deals.

They took out loans which are meant to track the base rate by a set premium once their fixed-rate period has ended – as, in the case of the 6,700 borrowers, all have done.

Those paying1.09% (0.59% above base rate) will soon be paying 3.09%. Those paying 2.69% will be paying 4.69%. It means that on a £150,000 interest-only loan, payments will go up by £250 per month to £386.25 and £586.25 respectively.

West Bromwich Building Society’s move follows that of Bank of Ireland, which hit 13,500 borrowers, including buy-to-let landlords, with a rates hike even though they too thought their tracker mortgages were at a set premium.

The financial ombudsman has received some 300 complaints about Bank of Ireland, which has defended its action saying that it was able to raise the rate thanks to a term and condition in the small print.

It is now thought that other lenders will follow the example of both Bank of Ireland and West Bromwich.

The building society, which has 36 branches, lost £9.4m in the last financial year and is unlikely to return to profitability before 2016, although it is due to move into smart new headquarters in 2015.

West Bromwich says that its hiking of rates for ‘professional’ buy-to-let landlords will generate an extra £15m a year – less if borrowers take their business elsewhere. The society is waiving exit fees until next March.

House Sales And Mortgage Approvals Both Increase

There were almost 90,000 UK residential property transactions in August, HMRC has reported.

The “seasonally adjusted” provisional figure – an estimate of 89,460 – was just 0.4% up on July, but 19.2% up on August last year.

The number of non-seasonally adjusted transactions was just over 100,000 and the highest since December 2009.

HMRC’s transaction figures bear little relation to the transaction data published by the Land Registry for England and Wales, although the Land Registry’s latest figures only go to May, when it says there were 62,651 transactions.

Another set of housing data was also published yesterday by high street banks. The British Bankers Association says that in August, banks issued 38,228 approvals for house purchase, up from the 37,428 in July, and from the 34,610 of August last year.

Miliband Promises 200,000 New Homes

Labour leader Ed Miliband is to set up a commission to review his party’s housing policy under the chairmanship of former BBC Trust chairman Sir Michael Lyons.

Speaking at yesterday’s party conference, Miliband also pledged that his party will build 200,000 new homes a year by 2020 if it comes to power.

He said that sites of new towns and garden cities would be identified, and that developers who sat on land would be told to use it or lose it.

Miliband told delegates: “There are nine million people in this country renting a home, many of whom would want to buy.

“We don’t just have a cost of living crisis, we have a housing crisis too.

“We will say to private developers – you can’t just sit on land and refuse to build. Either use the land or lose the land.”

Miliband also hinted at new planning powers. He said: “We’ll say to local authorities that they have a right to grow and that neighbouring authorities can’t just stop them. We’ll identify new towns and garden cities.

“We will have a clear aim that by the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation.”

John Cridland, leader of business organisation the CBI, said that Labour’s plans revealed great ambition but said Miliband should not have criticised developers.

He said: “We have fallen woefully behind on house building and the commitment to 200,000 homes a year is a great ambition. To achieve this, we need house builders on board, not criticised for holding on to land when it’s not viable to build on it.”

A spokesperson for the Home Builders Federation said developers did not unnecessarily hoard land.

The Town and Country Planning Association welcomed the proposal for a new generation of garden cities such as Welwyn and Letchworth. She said the ideals that inspired them were relevant today, and that they created new jobs and sustainable lifestyles.

Chief executive Kate Henderson said: “The garden cities were fired by a sense of idealism and enthusiasm with numerous voluntary organisations.”

Real Estate Consultant