In the UK property market over the last 12 month Student accommodation has been the best-performing asset with average double-digit returns these have been driven by strong rental growth.
Over the last 10 years the student housing sector has grown to a market worth in the region of £103bn. This growth has been driven by a rise in the number of students enrolling on university courses, up from 100m in 2000 to over 150m last year.
According to the property index student housing funds have returned close to 12% since the start of the year this compares with an average return of only 1.3% across the rest of the property market and an average 6% for other investments.
Over the last year a number of large investment funds have bought into the sector as
they believe that the sector is not greatly affected by the present economic downturn and lenders are also turning to student accommodation as one of a handful of property types which they view as low risk: vacancy rates run at about 5%, less than one-third of the figure elsewhere in the property sector.
To invest or find out more about the student investment sector please follow the link - STUDENT INVESTMENT
A lot of investors simply rely on the price given to them by the agent or developer. But developers can overcharge, they over-design buildings in a bid to win awards and they are forced to overcharge for the buildings simply to break even.
Some savvier investors may base their investments on a search on one of the many
internet property portals to find the average prices for similar properties in the area.
The more experienced might also use sites like Zoopla to see how properties have been amended, re-listed, re-valued since their original posting.
However, these sites only give us the values that the vendors and the estate agents think that the property is worth. This isn’t reliable as the vendor clearly wants to
obtain the maximum price, a strategy supported by the agent who normally works
on a commission basis.
There is only one way for investors to ascertain a property’s value which is truly safe and that is to find a properties residual value. The residual value is based on the amount of net rental income it can generate – anything above 6% looks like a
For example, if a property brings in £6,000 rent per year after all costs have been
taken in to account, that £6,000, based on a 6% net yield would give the property a value of £100,000.
That £100,000 would be the Residual Value of the property and it should be the focus for every investor going in to a deal. But at the minute investors ignore the residual and rely purely on the capital growth of a property which is hopelessly optimistic considering the market place at the moment.
Despite the residual value of a property being £100,000. The investor may pay £125,000 believing that the value of the property will increase and they can sell it for
£150,000. But then if property prices start to fall slightly, he’s suddenly in
negative equity and then the only price someone would be willing to pay for the
property is the Residual Value and the investor will have lost £25,000.
The key to real successful and safe investment is how you derive the 6% net yield which you have used to establish the property’s residual value. By working out the 6% net yield using below market value rent it means that the investor will not have
to contend with tenants struggling to pay rent. As rent continues to rise, there will always be a demand for properties charging below market value rent.
First time buyers will be queuing round the block to save a £100 per month, yet the
investor is still left with a 6% net yield because they have bought the property
at residual value.
It also means that there will always be savvy investors looking to purchase a property at the residual value because they are not only purchasing a strong income stream, but they are purchasing a property at a price that will not be affected by market fluctuations or crashes.
If the property market was to fall again then the investors who have invested
in residual value will be protected from the fall in house prices and when
houses start to get repossessed and more people are forced in to the rental
market, then their yields will go up even though they are still charging below
In the end, everybody will be relying on residual property valuations. It’s inevitably in the future but there’s no reason why investors can’t take advantage of them now.
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Beacon Apartments sits near to the A167 Gateshead Highway, which provides
surrounding areas and also the A1 via A184 and the A19 for those commuting to
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Student accommodation will continue to offer attractive investment returns in spite of upcoming changes to tuition fees, this is according to all the major market analysts.
Private investors have been attracted to student property as an asset class due to the relatively high yields on offer, driven by the imbalance between the supply of accommodation and the high demand for university places.
With an offer on at the moment of buy five get one free there has never been a better time to buy into this market especially when you consider that the current value for student accommodation is £45,000 per unit whilst the deal offered nets the properties down to £25000 per unit.
Link to further information – Student pods.
Buy to let mortgage lenders are sighing with relief after the European parliament voted to exclude landlord loans from tough new lending rules.
The UK’s Council of Mortgage Lenders (CML) has campaigned long and hard for
buy to let to be treated as a commercial loan rather than a residential mortgage, which was the initial thrust of the European directive on credit agreements relating to residential property (CARRP).
After intensive lobbying, the European Parliament’s ECON committee voted to
leave buy to let lending outside of the directive.
“We’re pleased to see that many of the long standing issues we have been
lobbying on have reached a positive outcome for the UK. So for example, the UK
would be able to exempt buy to let from the directive,” said a CML spokesman.
“However, some provisions have been included which only emerged at a late
stage of negotiations but which may not have had their full implications considered and we will continue to work on these issues as the directive goes into its next stage of discussions.”
CARRP is aimed at implementing a Europe-wide mortgage policy, but UK lenders
claimed this was unfair on buy to let landlords as the UK market differs significantly from the rest of Europe.
In most European countries, the buy to let market is either fledgling or developed through lending to companies rather than individual investors.
UK residential mortgages will come under the CARRP rules.
As a result, mortgage lenders will have to strengthen underwriting for loans, offer a cooling off period to borrowers and will have less power to repossess properties if homeowners fall in to arrears on mortgage repayments.
“Parliament has given a qualitative breakthrough regarding the initial text. We now have more ambitious legislation which establishes the international golden standards bringing in the principles recently adopted by the Financial Stability Board”, said the directive’s main champion Antolin Sanchez Presedo after the vote.
“We introduced a new chapter on financial education, strengthened information
to consumers, established a reflection period and the possibility to receive
good advice as well as fair principles for crisis situations.”
Demand for rental properties in Portugal is growing as more Portuguese nationals are forced to rent rather than buy, due to a lack of mortgage liquidity, presenting potential buy-to-let investment opportunities for shrewd property investors.
The latest Portuguese Housing Market Survey from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário (CI) shows that the country’s rental sector is benefiting from ongoing weakness in the sales market.
Ricardo Guimaraes, CI Spokesman, said: ‘Tight credit conditions are pushing both
households and home owners to the rented sector. Households can’t access
mortgage finance to purchase a house and therefore home owners in most cases
can’t sell their house. This is resulting in sharp increases in both the demand for and supply of rented accommodation.”
A further bonus for anyone thinking of buying property in Portugal is the fact that residential property prices in the country are falling due to a lack of activity in the sales market, presenting investors with opportunities to negotiate significant property price reductions.
Josh Miller, RICS senior economist, said: “Although sales volumes in the housing
market continue to fall, volumes in the lettings market are booming at the
moment. This is because households who cannot access mortgage finance are opting for rented accommodation instead.”
He added: “Given the deteriorating macro-economic backdrop and tightening in credit conditions that is already underway, the lettings market is therefore likely to
continue experiencing high volumes of activity in the near term.”
LINK to Portugal property pages EMAILfor the latest must sell properties
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