Despite the pressures of funding education student numbers rose 1. 7% in the last academic year (overseas students up 6%). As with other tenants students are becoming more demanding, with a move away from HMO's towards purpose-built student apartments. The fact that student halls of residence are permitted under recent rules for SIPP investment also serves to influence the market.
Senga Hill of Bournston, which provides investment opportunities in pre-let student apartments, summarises the current state of the market "Student BTL continues to be a robust sector on several fronts. Institutions are more willing to pay 'retail' prices as opposed to wholesale values to achieve exposure to this asset. Students (and their parents wanting peace of mind) are increasingly demanding better quality accommodation, which alongside HMO regs. is pulling demand towards purpose built, secure, 24 hour managed apartments as opposed to terraced housing stock. The new-style bespoke stock is proving itself - with high occupancy and retention levels both of which are key factors for BTL investors.
"Investors in purpose built student stock generally benefit from economies of scale, reduced exposure to individual risk and reduced time involvement due to onsite management. Universities appreciate the professional standards available to their students in terms of accommodation but also customer care - which helps to make their 'Uni' more appealing."
Student BTL's can also offer competitive yields: Projects currently handled by Bournston are offering between 5.6%-6.1 % (and in some cases 6.5%) net yield, after service/management charges. And Senga adds: "Student apartments - as a medium to long term investment based on an annual incremental growth capitalised also offer realistic and sustainable capital appreciation."
Now, let us round everything up by looking at the opinions of some of those who are actually closely involved in the BTL market on a daily basis.
Liam Bailey of Knight Frank says that, as we move into 2007, the UK buy to let market is "healthy". He tells us: "Interest in the sector is as high as ever. Landlords are committed to starting or growing their portfolios." He believes that immigration is exerting an influence on the market and will continue to do so, saying: "EU immigration is having a hugely positive impact on demand, with the pressure on existing accommodation becoming ever more intense over time."
Bailey also offers a few pointers on what, where and how good buy to let returns might be available this year. He tells us: "The best capital appreciation prospects this year are likely to be prime locations in central London, offering 12%+. If you were interested in higher yielding investments you need to look to secondary markets, towns where the local economy has been down for a long period and is now looking forward for some growth from new economic investment - think of Hull, Sunderland, Teesside, the Medway towns or Carlisle." He does however advise landlords to be cautious in such locations, adding:
"High yields usually come with higher risks." He also feels that student BTL is a "good option for higher yields", while cautioning "there is some evidence of oversupply and raised competition from the corporate accommodation providers."
