Purpose Build Student Accommodation VS HMOs – the future?

by Readers Question

9:41 AM, 29th February 2016
About 3 years ago

Purpose Build Student Accommodation VS HMOs – the future?

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Purpose Build Student Accommodation VS HMOs – the future?

I have been an investor in the student HMO sector for over 10 years. My properties are all 100 yr + Victorian terraced houses. I invest a large amount of money each year on maintenance. student halls

Looking at the future and the slow but significant influx of purpose build student accommodation, should I be concerned? My area is Swansea with a good steady and growing student population.

However there are plans for a rapid increase of purpose build units over the next few years. All are at high prices, but of course I cannot compete with these new apartment style units.

I suppose I am concerned that there will be a slow trend of students wanting the new special build flats and apartments and the demand for the traditional stock will start to diminish.

I just wanted to enquire if other landlords in other cities have experienced this trend and wonder if its time to start to sell up and move on?

Laurie



Comments

Neil Patterson

9:44 AM, 29th February 2016
About 3 years ago

Hi Laurie,

You are correct in that purpose built student property has become much more popular in the last2-3 years, but subject to regulation and licensing it is still a reasonably free market.

Therefore it is down in large part to supply and demand factors in that can you supply accommodation at a quality and price ratio sufficient to maintain demand.

leon mepham

11:56 AM, 29th February 2016
About 3 years ago

Hi Laurie,

Students are sociable in the habits, i know i was, and i think there will always be a place for the typical student house verses purpose built student apartments. Brighton has seen a lot of units being built in recent years but i don't think they will replace the demand for students to live in a shared house.

Many first years will tell you they get sick of halls at the end of their first year and are looking forward to living in one house with their selected best 3/4 mates. An HMO is a more sociable way of living and in my opinion there will always be a strong demand for slightly cheaper but still good quality housing of this type.

I'm a landlord and i'm not worried, we just need to ensure our properties are kept up to a good standard. For me, putting my self in a students shoes, I would much prefer to chose an HMO than to isolate myself in a purpose built, swanky, expensive apartment. Lets hope i'm right!

Leon

Dr Rosalind Beck

13:28 PM, 29th February 2016
About 3 years ago

Hi Laurie.
I think our HMOs are highly competitive compared to the purpose-built ones. In Cardiff private student lets are around £250-£300 per month and I think the purpose-built ones would be at least £100 a month more. I know that when I was a student and a young professional my main criterion when renting was price and this is the case for many. Also, when I was a student there was a lot of kudos in going out and living in a house 'like a real adult,' and perhaps that is still the case. I am also not worried about these new-builds. They should be more worried than they are. If Corby gets in there might be a further 'leveling of the playing field' and they might get their finance costs disallowed. There are no guarantees now.

astj n

13:51 PM, 29th February 2016
About 3 years ago

Hi Laurie,

None of us, except perhaps GO, can predict the future or we would not be having to try so hard to extricate ourselves from our present pickle. But I agree with the points Leon makes and particularly the fact that so many young people look forward to the experience of living with a few new-found friends, enjoying the relative freedom that a shared house offers. By and large they have come from a family home that resembles such an environment, something that purpose-built accommodation cannot offer however hard it tries to escape from an institutionalised feel. This is totally different from the mindset overseas, and particularly France, for example where students almost invariably go to uni. in their home town.

The days have long gone when university education was for a small minority and good A-level results were a stepping stone to a good job. Many young people and parents now regard a university education as a priority if not a necessity, subject of course to grades. The market is therefore not only very substantial but in my view is secure with continually growing numbers going to university and in need of accommodation.

I have been involved in student shared housing, also mainly 100 year plus Victorian terraced houses in Leeds and York, for the last 20 years where there has already been a noticeable increase in new purpose-built accommodation. Such buildings will undoubtedly have their attractions for certain sectors such as overseas students and very wealthy UK students and I believe it is a case of finding the right niche in the market. The private student landlord does not need, and usually cannot, compete with all the facilities offered in purpose-built blocks but does need to move with the times and ensure properties meet a much higher standard of furnishing and decor than hitherto and the provision of such things as business grade wi-fi broadband included in the rent should be the norm. If you have been letting student houses for ten years and spend money maintaining them, your properties are obviously in the right locations and to a standard to cater for the demand. It's not purpose-built blocks that are the enemy you need to be concerned about!

Anthony

Gary Dully

8:17 AM, 1st March 2016
About 3 years ago

Why not rent to divorced men?

Pick a HMO from your portfolio and rent it to anybody but students.

They are usually house trained, don't like partying and in general have money.

My HMO's with this type of tenant usually stay for about 5 years before moving on.

Laurie Hughes

8:59 AM, 1st March 2016
About 3 years ago

Many thanks to everyone that has commented on this post. It is great to have a view from people outside of my usual network and its much appreciated.

Joel Davis

23:15 PM, 1st March 2016
About 3 years ago

I think the PBSA (purpose built student accommodation) experiment was a forerunner to the new govt. strategy to replace BTL with institutional housing schemes.

The aim was to see if it was possible for the local authority to work with big corporates to consolidate the student population away from old houses and into PBSA.

Bradford notably had more PBSA than the total population of students. Half the PBSA is empty and many small landlords ruined. In other cities, PBSA has failed to dominate. Landlords have invested in luxury refurbishments. In reposnse the new PBSA is surpassing previous schemes with ever higher standards of luxury.

But why have old landlords survived? Why do students prefer to live in messy crime ridden, victorian ghettos with rubbish and graffiti everywhere when they could spend 3 years in a 'hotel'?

The answer is because they want to live near their friends as part of a community.

To beat PBSA, invest in indulgent, luxury student palaces.

Students don't want cheap digs. They are racking up huge debts anyway so may as well borrow a bit more to have the time of their lives before responsibility and repayment of their debts.

Chris Byways

15:33 PM, 2nd March 2016
About 3 years ago

It is necessary to move with the times, and continually improve quality.

The interesting articles on Houzz gives food for thought. http://www.houzz.co.uk/ideabooks/61015741?utm_source=Houzz&utm_campaign=u2587&utm_medium=email&utm_content=gallery0

Watching homes under the hammer recently, a house was bought for £65k, £8k spent, and converted from 2 large beds to 4 beds, to a high standard, and let to young professionals who knew each other from same factory. They liked the social life of sharing, and we're paying £350 to £400pm, they said return was a wapping 24%.

Other issues: one broadband cost. Lower council tax for whole building is included - usually. Easier and cheaper to move compared to buying.

So I think PRS caters for a different market and can co-exist with pbsa in most cities. And usually is cheaper.


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