Student accommodation in the UK is becoming an increasingly popular destination for global investors as institutions look for a relatively safe place to put their money. In one of the largest transactions carried out so far, the property arm of Temasek, Singapore's state investment fund, this year paid £417m for a portfolio of 25 student residences. But should private investors be following in institutions' footsteps?
Demand for student accommodation has boomed along with the number of people attending higher education institutions in Britain: there were 2.27 million students in 2014-2015, up from 1.5 million 20 years ago. There are currently 525,000 "purpose-built student accommodation" (PBSA) bedrooms across the UK that are intended to meet the resulting shortfall in university-provided accommodation plus planning consent for a further 90,000, and applications under way for almost 44,000 more, according to data from estate agency Knight Frank.
It is possible for individuals to invest directly in PBSAs by purchasing a "unit" within a development. This can look like a tempting way in to the sector, with some specialist companies offering "guaranteed" rental yields of up to 10% for a set period of time. This type of arrangement usually involves handing over around £60,000 in exchange for a studio flat within a development. The management company will then take responsibility for the running of the letting ie, finding tenants and carrying out maintenance.
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While this may sound great, it's not usually that straightforward or sensible an option. It's likely to be difficult to get a mortgage for this type of rental property, meaning you would probably need to pay with cash. (This will in turn limit the number of people who you can sell it to later on.) Once the guaranteed returns period has ended, the yield might decrease sharply, while management fees might shoot up. There have also been several cases where the management firm has collapsed, leaving owners with a flat full of students to deal with.
If you're looking to buy into the student property sector, you might instead consider purchasing a buy-to-let property, but be aware that running a multiple-occupancy property can involve a fair amount of work. A less labour-intensive route might be to invest in a fund that buys into student property, such as real-estate investment trust GCP Student Living (LSE: DIGS), which currently yields 3.8%.
Buy a Brexit bolthole
Fears over the outcome of the Brexit vote have "reignited interest in backdoor ways of securing residency in Europe", as people look to hang on to the continued flexibility afforded by an EU passport, says Hannah Roberts in the Financial Times. For those with the money to pay for it, this option is readily within reach.
It is not uncommon for countries (including the UK and US) to offer "residency programmes", often called "golden visas", which grant residency, or even citizenship, in exchange for real-estate purchases or other investments in a nation's economy. In the years after the 2008 financial crisis several of Europe's harder hit economies, such as Greece and Cyprus, set up their own programmes specifically to attract foreign investment.
These programmes usually require a large outlay and citizenship, unsurprisingly, takes a far greater investment than residence. At the higher end of the scale a €2m investment in the Cypriot economy will grant you immediate citizenship, along with the right to work or live anywhere in the EU. Those looking to gain citizenship in Malta must contribute €650,000 to the Government Development Fund, plus additional contributions of €25,000 per family member, a €150,000 investment in approved instruments, and a minimum property purchase of €350,000.
For those who don't have quite that much to spare, long-term residency in Greece can be achieved by buying local property to the tune of roughly €250,000. In Portugal buying property worth about €500,000 and spending one week in the country during the first year is enough to acquire and maintain residency status.
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