Recently, a fifty-something colleague glancing at a photograph of a young female university student in her sleek, interior designed apartment, remarked (somewhat aggrieved) that her flat was considerably superior to his. He’d worked to pay for his own property, while hers was bought for her from the equity in her parents’ home. Students’ aspirations are much higher than they were a generation ago. According to a Halifax survey, many parents now are willing to forego a holiday or new kitchen to ensure their son or daughter is in a safe, modern environment while living away from home. It is no longer possible for a landlord to furnish a flat with mis-matched goods bought at auction and expect people to pay for it. The Government hopes its recently-announced plan to licence landlords will raise standards further, a move broadly welcomed by letting agents.

Caroline Kavanagh (pictured right) of Badger Holdings, parent company to Townends and Regents Estate Agents, says, “We have, at times, had to take the decision not to market a property because we felt that it was substandard. By imposing this legislation, landlords would have no choice but to offer a level of quality that tenants should rightly expect, or face some serious consequences.


500,000 bedrooms needed this year

The rise in the number of university and college students has been the salvation of some developers who realised there would be a shortage of privately owned accommodation, either for rent or sale. According to UCAS, the number of applications to UK colleges and universities is up 8.8 per cent on this time last year. More than half a million people have applied to begin a full time undergraduate course and numbers are also on the rise for applications from overseas students, especially from Singapore, China and Malaysia. Unimpressed by Britain’s crumbling old housing stock, a new development is the chosen option for Asian students, if they can’t secure a place on campus.

The hope that continued education will boost job prospects in a shrinking employment market has also fuelled a 15 per cent rise in applications from over-25s who may not want to stay in halls, or even be given the option. University campuses are bursting at the seams and will only guarantee places for first year students. Leeds University says it gets more applications for single, en-suite rooms on campus than they have places available, with up to eight people chasing each place. The city has more than 72,000 college and university students, the third biggest after London and Manchester.

Many parents, noting the competition for rooms and adding up the unrecoverable cost of paying for them, decide to buy a flat for a son or daughter. If they let spare rooms to fellow students and have the time to ride out the market downturn before re-selling, they have at least a chance of coming out financially ahead. After all, there has rarely been a better time to invest in property. Halifax reports the house price to earnings ratio is at its lowest for seven years. Mortgage rates are low and there are signs the fall in the market is slowing.


Student Zsuzsi’s studio

Student nurse Zsuzsi Judd, 20, who is studying at Thames Valley University, was helped by her family to buy a studio apartment in Barratt West London’s Great West Quarter development in Brentford. Current market conditions allowed her to negotiate a £20,000 discount on the price. As the studio was the former show apartment, the price also included all the soft furnishings. As a bonus, Zsuzsi discovered the design of the apartment, where everything from the bed to bedside tables fold away, minimises the opportunity for dust to settle on surfaces. As she suffered from dust allergies, she was delighted to find her health improved. Current prices at Great Western, Brentford, start at £190,000.

According to a consumer confidence survey carried out by the property website Rightmove, almost half of the 22,800 home-movers canvassed said they expected average rents to stay the same as they are, a year from now. Only 6.6 per cent took the gloomy view that rents would tumble by 10 per cent. The desire to buy to let is still alive and beating.


Great returns

Says John Heron, Managing Director of Paragon Mortgages, a specialist provider of residential buy-to-let mortgages, “Student property can generate great returns because they are usually let on a per room basis, which tends to produce a better yield than letting to a single occupant. “However, investors have to ensure that they research the local area and select the right property for the student market. It is essential that parents looking to purchase property for their children ensure that the figures add up before they make the investment. Investors also need to make sure they are clued up about the various rules and regulations, such as those governing Houses in Multiple Occupation.”

Interestingly, the best rental yields don’t always come from the most obvious locations. According to Paragon Mortgages, Durham – with one of the country’s smallest student populations – delivered the best return of the 50 locations analysed last year. The cathedral city was followed by Nottingham – which has two universities and 60,000 students. Some less established university towns strongly outperform Oxford, Cambridge and London in the yields stakes. Stoke, Hull, Derby and Swansea all provided a good return. In Sheffield, property built to appeal to the student market is credited as having helped to regenerate the city centre, spreading the benefits to local agents.


Eight per cent yields in Surrey

Hannah Richardson is Branch Manager of Townends Lettings in Egham, Surrey, home to Royal Holloway, University of London and comments, “Egham has always had a very strong student market and the student investment market has picked up over the last four months, mainly fed by investors finding it hard to make money from their savings and buying up three or four-bedroom properties. There is a particular estate in nearby Englefield Green where you can pick up a good two to three-bedroom property for around £200,000 or central Egham for around £240-250,000 for what eventually divides up as a four-bedroom property. These are good investments, as getting £1,600 on a £250,000 property is over seven per cent return and a lot of them are making it work at 8% return and above. Rooms have been rented out from anything from £380 to £450 pcm.

“In general, the student market is very strong and makes up more than a third of our overall business for the year. We have found this year more landlords who would usually let out privately have come to an agent. Maybe it’s to do with demand or because there is more legislation now and they want to make sure they are doing things right.


Eco friendly and a free bike

The chronic shortage of affordable student housing in London is legend. However, Hive Student Residences hopes to ease the pain, at least a little. The company, set up in 2006 by Johnny Manns and Johnny Gallagher, aims to provide 3,000 interior designed, environmentally sound student rooms in the capital. The first two schemes are due to open this year in Hoxton and Bethnal Green, with prices starting from £210 per week, including utility bills and broadband.

Journey times to the main universities should be between 15 and 30 minutes, they say. However, to encourage a low carbon footprint, each resident will be provided with a folding bicycle. It’s a gimmick, of course, but with luck won’t meet the same fate as the Paris velib bike scheme which ended up with thieves riding off with 3,000 of them and dumping them in the Seine.

Johnny Manns says, “There are currently 250,000 full-time students in London, and only 40,000 purpose-built student housing bed spaces available to them. Around 90 per cent of this existing accommodation is run by universities and allocated to first year undergraduates, so for well over 200,000 second and third year undergraduates and post-graduates there is a huge shortfall in the type of sought-after, quality accommodation offered by secure private student residences.”

There is planning consent for three more schemes in Shoreditch, Tower Hill and Southbank and a sixth development is underway in Olympia, West London. It is a small beginning. Knight Frank, which has a dedicated Student Property Division advising on development and investment, estimates around a fifth of the city’s student population comes from overseas. For London to continue to attract those students – five of the capital’s universities are ranked in the world’s top 200 – and there must be somewhere for them to live.


Guarantors reassure landlords

While dedicated student schemes operated directly by the developer don’t help agents make money, there are thousands of students who prefer to take the private route. Some London letting agents don’t like to admit to renting to students, fearing riotous parties and furious landlords, but others are delighted to welcome them as tenants. With parents standing as guarantors, and rent usually paid up six months in advance – a year if they are lucky – landlords are reassured of income and good behaviour.

Says Marc von Grundherr, director of Lettings at Benham & Reeves in Kensington: “Landlords should never discount students as tenants. We have had a number of well-heeled students who were doing European business degrees, especially from America. What landlords must be careful about is getting a sponsor or parental guarantee in this country. There is no point in the guarantor being in Qatar where it would be difficult and expensive to pursue a claim.”

Martin Bikhit, whose estate agency Kay & Co covers London’s Marylebone and Bloomsbury – prime central areas for students – points out the advantages. “There is a strong market for post graduate or international students which is sometimes overlooked. We have let apartments to international students with wealthy parents for large sums.

Some Russians recently rented a twobedroom flat for their son, who was studying at the London Business School, for £800 a week,” says Martin. “There is always a concern from landlords that even at those price levels some student tenants would party too hard, but in the current climate some landlords are without a better alternative.”

Loughborough University, celebrating its Centenary year this year, has 36,000 students and 3,000 staff, making a strong impact on the local property market. “There is a strong demand in the town from parents buying homes for their children at the university, and from amateur and professional landlords,” says Tony Cotterall, of the local Frank Innes estate agency.

“We have a golden triangle of Victorian terraced houses which sell from £100,000, within walking distance of the campus. They are always popular. A two-bedroom apartment costs from around £110,000.”

Only the best for our children Close to Manchester’s city centre, Gleeson Homes’ Grove Village development has been popular with buy-to-let investors and parents buying for student children. Prices at the development start at £89,950. “With prices being so low, many believe this is now the time to buy,” says Julie Rayner, Gleeson’s Sales Director.

“Parents tell us they think this is an opportunity to get a foot on the property ladder for their children and see it as an investment for their own and their child’s future. “Parents want to be assured their children are living in high quality accommodation and with new build properties they can be assured of that.”