PURPOSE built student accommodation (PBSA) or student property in the UK is an attractive investment as it offers an annual net yield of between 7% and 9% after outgoings, says Cornerstone International Properties director Virata Thaivasigamony.
In addition, investors in UK PBSAs are exempted from capital gains tax to encourage more PBSA developments and investors.
Investors also get tax relief from rental income.
PBSAs are usually brand new or fairly new properties with modern facilities.
This is important, given the wide disparity of UK properties, some of which can be rather dilapidated and are used as student accommodation.
Most PBSAs are well-equipped with 24-hour security, common areas, library, study areas, cinema room and on-site laundry services.
“The size of a PBSA unit is small, construction cost is much lower, whereas rentals are strong. At an estimated 8% net yield per annum, with no taxes, it is an attractive investment opportunity,” says Virata.
Knight Frank Global Research estimates an annual 4% student growth for the next five to 10 years. Last year, the UK government removed quotas for foreign student intakes.
“So there is tremendous growth to be expected as the removal of the student quota has not been factored into the 4% estimate,” says Virata.
Cornerstone focuses on student properties located in the Greater London region or places out of London like Manchester, Liverpool and Glasgow. Most of these locations have reputable universities, and without the high land prices the likes of London.
Cornerstone’s latest project is the London Spring Place, in Luton. The mall is a five-minute walk away and another five to the university.
“It’s not so much about which city it’s in, it’s more about the housing shortage.
“There are about 24,000 students in Luton, and less than 5,000 private accommodation to house them.
“Some 80% of the students have difficulties getting accommodation due to the huge shortage, so that’s why we focus on student accommodation in the UK.
“Real estate research house CBRE Research also quoted that 99% of PBSAs are occupied,” Virata tells StarBizWeek.
In 2015, nearly three quarters of all projects sold by Cornerstone were PBSAs.
Phase 1 of London Spring Place, which comprises 80 units, was sold out within several months last year. Cornerstone prides itself in its research and selection of property developers.
Out of the initial 20 projects by Cornerstone, only two developers made the cut.
Developers need to have a good track record with a number of completed properties.
Virata says the company is researching properties in the United States, the Philippines and Japan but “we don’t think it’s time to venture into these countries yet,” says Virata.
London Spring Place Phase 2 will be pre-launched today and tomorrow in Petaling Jaya, and at the Education UK 2016 exhibition in KLCC.
The official launch is on March 5 and 6 in Eastin Hotel, Petaling Jaya and G Hotel, Penang.
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