Student property in the UK: the basic things an investor should be aware of

students-property-investingInvesting in student property in major university towns in England is a highly profitable direction, so by now a strong demand for residential properties in the student residential sector has formed already. The fact is that in cities such as Liverpool, Oxford, Manchester, Cambridge and Sheffield a constant influx of foreign students is observed who need a place to stay. This provokes a strong demand and increased competition between buyers. The demand for real estate in cities often exceeds the market average competition in London (12.1 buyers for the object). As a consequence, the market sales prices, as well as rental prices are rising fast.

A group of analysts from Knight Frank investigated the growth of rental rates in such cities as Oxford and Cambridge, and it was found that the rent has increased by 170% and 160%, respectively. These figures are considered in comparison with the growth in rentals in other cities out of a radius of top universities.

Thus, the main prospects of investment in student property lies in the steady demand due to the influx of students globalisation; intense price growth in sales, which is higher than the average market value growth rates have equivalent objects; minimal risk and a quick return of capital. The average investment in student property sector will pay for themselves within 1-2 years, the net profit can be obtained from both the rental and transactions on the resale.

The procedure to conclude the agreement with developers

When buying student property investor should enter into a contract with the developer. To reserve object investor pays a deposit in the initial phase of construction of real estate. This would require a £5,000 on deposit – this would amount to a part of the total price of the object. After the expiry of 21 days the buyer and the developer exchange contracts. In parallel to this, the investor contributes an additional 50% of the project cost. After this operation, the buyer becomes the rightful owner of the property, and completes the payment of remaining 50% by the end of construction time.

Investors are thus reliably protected from construction freezing. If the complex is not launched on time (the delays of more than 6 months), the client is compensated for their investments. Development company will pay the full amount of investment, namely, the initial payment of 50%. This condition is spelled out in the regulatory legislation of Great Britain. The legal services are covered separately by the investor – the work of conveyance solicitors will cost you up to 0.6% of the total cost of the premises.

How operation management companies function

Once the complex is put into operation, the apartment owner signs a contract with the management company. The competence of the manager will be to search for tenants with stable solvency. Also, the management company will follow the property status, terms of payment of utility bills, etc. The potential annual yield of the owner will vary between 6% – 9% in this case. The contract with the management company is typically reissued on an annual basis.

The average yield of apartments handed over to rental use, is exceeding 6% per annum (according to a typical contract investor receives net income at the end of each quarter). Due to intensive growth in the long term lease the investor’s annual yield is expected to increase.

UK real estate investment flows from Russia are draining, falling from the top list

uk-property-investment-flowsThe Russian investors activity in overseas property market, and UK  in particular, is switching from the path of rapid growth to accelerated falling. Most potential investing customers receive salaries in local currency, and along with the sharp decrease of the Russian economy the price for the real estate has risen by 50% in less than 2.5 years. In addition to the price of the available options, significantly increased the cost of maintenance of apartments and houses, and naturally, the cost of conveyancing solicitors services.

The state of affairs is most probably going to have a long-term effect. The dynamics of the economy in projection on overseas property investment is pre-determined for at least the next year. The economic situation, in turn, is largely dependent on the foreign environment, the continuation or termination of sanctions, the dynamics of national currency fluctuations and the of oil prices. However, the situation may not change significantly as the demand for overseas property from Russians is expected to rest at the same level due to capital transfer from the country. Firstly, a large part wealthy Russians is interested in foreign trade of real estate, including those that hold savings in more stable currencies or paid in foreign currency. The fall of the ruble does not negatively affect them. Secondly, there has been a change of priorities recently. Previously, the majority of customers considered buying resort property for their own leisure in Spain, Bulgaria, Montenegro, but now such purchases are declining, and emerges a larger group of buyers who buy real estate for investment objects. By investing in profitable real estate individuals and businesses are traditionally trying to diversify their assets, to protect themselves from hazards and create a ‘reserve airfield’. Thirdly, through foreign real estate agencies specialising in the Russian customers real estate is oftentimes purchased by citizens of other CIS countries, such as Kazakhstan. Their purchases are sometimes credited as ‘Russian’ and technically affect the performance demand.

A look into the 2016

So what trends will be see this year? The process of Investing in profitable real estate liquidity of stable economies will increase. The most significant reason for Russians customers acquiring overseas property is political and economic stability. These factors are important for home buyers in the UK and Germany: this reason was noted by 82 and 76 per cent of respondents, respectively. After stability comes the climate, this is where the United States and France are leading the race, while in the United States this factor is considered in conjunction with price (52.8% of respondents). Interestingly, when Russian problems in the economy emerged, a surge in interest in the real estate options of the following countries was observed: UK, Germany, USA, France. In November and December 2015 it was recorded an increase in demand for profitable real estate. The Russians are in a hurry to invest surplus funds amid rising dollar. Up to 30% of buyers purchased overseas property for investment purposes. In addition, many foreign objects purchased to create a ‘reserve airfield’.