Finally, the death of UK Student accommodation

The end of student accomodation investment?

It's fair to say that companies selling UK student accommodation have had a massively profitable time these past 5 years but the time has already arrived where the writing is on the wall for UK student accommodation.

I must confess I was never drawn to it!

Despite the promises of buybacks on property investments and easy resales, there is no market so you are stuck with it… You cannot leverage it because no bank will touch it… even the developers that gave you vendor finance really just hyped up the prices and made it look appealing through the low capital entry point… now we are starting to hear that the rental guarantees aren't all they cracked up to be because the company that offered them had no assets to back them up, so even if your property did actually complete and you got your guarantees the returns after this period ended are often coming in far less than a normal buy-to-let property.

So I stuck with plain old buy-to-let property investments through this whole period, for the same reasons that I didn't do Harlequin Caribbean property or Ecohouse Brazilian property, I chose not to do UK student property.

The challenges were there from the start, massive commissions for very little capital outlay (between 10%-20% of the capital was paid out in commission) no mortgages required which means little third-party interference in the prices.

Many property investment companies have made a fortune off student accommodation, which in my mind is a totally unproven strategy over the long term.

Do I think that you can make money with this sector… Yes.. but I also think the way it's been sold is over the top, hyped up and loads of BS. That tends to happen when you are making around £5k-£12k per property sold. Incredible.

UK Student Accommodation is becoming less appealing even to the agents selling it

Now you might just think that I am writing a blog like this because I don't sell it and it's some sort of easy target. It is…

An agent I know in Singapore who has sold 495 units has swapped companies because besides the ones that never completed, the ones where guarantees were not being paid, the ones where the yield was nowhere near the predicted and the ones where the management companies were not what they were sold, he got a sense that his investors could never sell these back. With so many new student pods being sold there was going to be a massive oversupply.

This past week I have had two people apply for jobs who were sick of UK student housing investors complaining about their investments not turning out how they were sold.

Another good mate who runs one of the largest providers of student property in the UK warned me early about the troubles within the sector. They totally strip and replace their pods every three years otherwise they simply don't maintain their yield, this was never in any cash flow.

The bottom line is, if you are considering investing in UK student accommodation then why not also look at the lower value buy-to-let properties in the Northern parts of the UK. Prices are between £50,000 and £120,000 for new build stock and yields are as high as 9% which is very much a proven market and you can resell as easy as walking into a local agency.

If you're interested then give the team a call on +44 (0)207 923 6100, I am sure they will have more horror stories which are only now coming to fruition but will become more and more over the next few years as the massive supply of student pods comes to market (or doesn't).

Live with passion and fun,
Brett Alegre-Wood

Brett Alegre-Wood
December 20, 2014

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