Planning Ahead1st Mar 2019
If you have schoolgoing children, you’re probably already thinking about where they will go to university, and how you will pay for it. And you don’t have to limit your choices to within our borders – there are some great investments in student developments in, for example, the UK.
Vita Student, which was launched by Select Property Group – one of the UK’s leading property developers – in 2012, is the market leader in the UK’s purpose-built student accommodation (PBSA) sector. With a portfolio valued at £1.1 billion, and 4,642 fully managed properties currently in operation in 22 UK cities, Vita Student has generated £121 million in rental income.
All the properties are in first-tier university towns with Russell Group universities – these are the top 24 world-class, research-intensive universities in Britain.
A growing demand
At present there are 1.7 million students in higher education in Britain, but there is not nearly enough dedicated student accommodation for them. In the 2017/18 academic year there were just 602,000 PBSA properties available. This means that over one million students cannot access high-quality PBSA.
Vita Student strategy
Vita Student is located only in elite university cities in the UK, specifically those cities that are home to Russell Group institutions, because this is where the demand for education – and hence student accommodation – will always be highest.
It may be tempting to invest in second- and third-tier university cities, because initial purchase costs may be lower, but these are the cities where student demand will be more volatile. For example, if the cost of education increases, or the demand from domestic students falls, it’s these cities that will see the biggest reduction in student numbers.
However, Russell Group universities are the world’s best, respected by students and employers around the world. These are universities for which demand from the world’s best students will always be high. These are the cities where student numbers will always remain consistently high and, consequently, where the demand for student property will always be the most sustained.
BUT HOW CAN YOU PREDICT THE FUTURE?
Sure, your little darlings may well want to study overseas, but how can you know where? And what if you have more than one child, and they decide to study in different cities, or even countries? Well, clearly, it would be great if you bought an investment property in the city they eventually choose, but really that’s just a bonus. If you buy a good student investment property in any hard-currency destination, you can offset the rent you will have to pay with the rent you receive. And until then you can put the rental into a smart investment to pay for all the fees and airfares you’ll have to be forking out in a few years.
Vita Student chooses Russell Group university cities with the lowest levels of available PBSA stock, meaning that their investors can capitalise on undersupplied markets in cities where demand will always be high, thereby guaranteeing the long-term performance of their investment.
Vita Student has PBSAs in 22 cities within the UK, all of which offer great investment opportunities, but you’re a bit late for most of them – unless you’re looking for a resale. So, rather, look to future developments, one of the most promising of which is Vita Student Cardiff.
There are three universities in the city – Cardiff Metropolitan University, the University of South Wales, and the Russell Group Cardiff University – with a total student number in excess of 70,000.
Cardiff University has about 37,500 students of which about a quarter are international. It was ranked in the top 100 by the Academic Ranking of World Universities in 2017, which has helped to drive international student numbers. Cardiff University has seen a 31% and 18% increase in EU and non-EU students
respectively since 2010/11.
This growth is having a dramatic impact on Cardiff’s student property market. As international student numbers increase, so does the demand for high-quality PBSA, providing homes close to the university and Cardiff’s key city centre landmarks.
And this is making it the UK’s strongest investment location for student property.
Underlining the demand for PBSA, Cardiff has seen a 137% increase since 2010/11 in the number of people living in private-sector PBSA properties, while the number of students living in old-fashioned university-provided residences has fallen.
Location, location, location
Crucially, students in Cardiff want to live in the city. With Cardiff University located in the key CF10 postal code, just minutes from the city centre and its shops, restaurants and landmarks, this is the area where students want to be.
Yet the vast majority of students currently live in old-fashioned residential areas of Cardiff, away from the universities and city centre. In the Cathays district, for example, 70% of residents are students, many of whom live in somewhat substandard houses of multiple occupancy (HMOs) – the classic grubby student digs many of us remember from the 20th century in places like Braamfontein,
Observatory and Grahamstown.
What this means is that now, more than ever, there is a huge demand for high-quality PBSA in Cardiff city centre – creating a significant investment opportunity in the UK’s strongest student property investment city.
Vita Student Cardiff: what students – and investors – have been waiting for
Bridging the gap between work and play, Vita Student Cardiff is the location students are demanding – a location strategically chosen to increase rental returns for investors. It is:
• right next to Cardiff University
• within five minutes’ walk of Cardiff Castle, Town Hall, National Museum and main shopping streets
• in the very heart of the CF10 city centre postcode, an area with an extremely low supply of student property.
This is the location that will command the highest demand and highest rental premiums, driving the returns of all Vita Student Cardiff’s property investors.
The nitty-gritty details
• Vita Student Cardiff will consist of 401 apartments, and offera yield of 6.5% assured for three years. Prices start from just £143,000.
• A 30% deposit secures a unit, and no further payment need be made until completion in Q3 2021.
• Opening a bank account in the UK is difficult so, for South Africans to purchase, it would be most convenient to open a GBP-based bank account with a local bank here in South Africa.
• PBSAs cannot be bonded.
• The apartments come fully furnished and decorated, ready for the students to move in.
• Be aware that you will have to pay income tax on any foreign earnings.
• There are no restrictions on reselling – but only once the developer has sold all the units. You can sell through the developer, which will entail a 3% brokerage fee and 1% administration fee, all plus VAT.
Cardiff: A market of huge investment potential
• At 8.5%, Cardiff had the fastest annual student rental growth in 2017/18 of any UK city.
• The UK average rental growth during this period was just 2.55%.
• Cardiff has some of the UK’s highest annual yields from student property, with average yields of 5.59% as opposed to the UK average of just 4.72%.
• Best of all, there is a significant undersupply of PBSA – 25,354 students in Cardiff cannot access the modern, purpose-built homes they are demanding.