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Investment in student housing set to rise in the UK
London’s full time student population is expected to rise by 50% in the next 10 years while capital flows into student housing is expected to triple reaching £5.7 billion by the end of 2015, new research shows. Indeed, direct investment in the UK student housing market has surged over the past two years, rising from under £500 million in 2010 to £3.8 billion over the first half of 2015 and £1.5 billion in London, says the report by property firm JLL. Non-European Union students have been the fastest growing segment, with numbers increasing by 50% over 10 years and a recent study by London First shows that international students bring a net benefit of £2.3 billion per annum to London's economy supporting 60,000 jobs in the capital. The research further highlighted that rising house prices and constraints on mortgage lending have forced more people into rented accommodation. More students are also renting and 28% of London’s student population are living in Houses of Multiple Occupation (HMOs). The provision of university managed accommodation has not kept pace with the growth in student numbers and the increasing quality and quantity of PBSA stock has provided students with a welcome alternative to the rising rental costs of HMOs, the report points out. Additionally, two of the fastest growing segments of London’s student population are overseas and postgraduate students, who have occupied much of the PBSA (Purpose Built Student Accommodation). ‘We have seen extraordinary growth in UK student numbers over the past 20 years and while UK student numbers are now stabilised, international student numbers set to rise dramatically in the next decade,’ said Philip Hillman, chairman of JLL’s Alternative Division. ‘The provision of good quality student accommodation was traditionally the responsibility of the universities but in recent years, most new accommodation had been provided by private investors and developers,’ he explained. ‘The Gross Value Added supported by student spending throughout the UK is of the order of £25 billion per annum. This represents 1.03% of UK GDP. Put in perspective, this figure is equivalent to one third of the total contribution of the aviation sector to UK GDP,’ he added. According to Himanshu Wani, associate director of UK research at JLL, purpose built student accommodation in the UK has seen a significant rise in investment activity, with projected capital flows into the sector of £5.7 billion by the end of 2015, up from £1.7 billion in 2014. ‘This is especially pronounced in London, with one of the largest student populations globally, supporting strong demand for student housing. Indeed, with the London student population expected to rise by 50% by 2025, one of the main challenges will be developing sufficient supply,’ he said. The report points out that student housing is one of the largest sub-sectors within the ‘alternative’ property asset class. Alternatives comprise all of the real estate sectors beyond traditional office,… Continue reading
Families in rented homes struggle to save a deposit, new research shows
Families who rent their homes are less likely to have a cushion of savings or protection products to protect them against financial shocks, according to a new financial report. Some 25% of private renting families, or 650,000 people would struggle to cope compared to 11% of those who have a home with a mortgage and 5% who own their home outright, says the research from insurance firm Aviva. Renting families are also less likely to have insurance in place to provide financial cover should they become ill or die. Just 20% families who rent privately have life insurance, compared to 25% who own their home outright and 48% who own their home with a mortgage. Similarly, 4% of renting families have critical illness cover and only 3% have income protection. The findings follow a significant rise in the proportion of families with dependent children living in rented accommodation, according to Aviva’s analysis of data from the Office for National Statistics (ONS) In 2013 some 17.7% of couples with dependent children were private renters. This rose by 3.6 percentage points to 21.3% in 2014. The same trend is true for single parents with 31.9% in rented accommodation in 2014, compared to 30.2% in the previous year, a rise of 1.7%. As a result, there were 1.5 million families with dependent children in rented accommodation in 2014, a 19% rise since 2013 when it was 1.3 million. ‘Renters might not have a mortgage to pay, but they still have financial obligations like bills and monthly rent. Not having a savings cushion in place means unexpected costs could make day to day living a struggle, while a lack of income protection could be disastrous should they become ill and unable to work,’ said Louise Colley, managing director, protection at Aviva. ‘With growing numbers of parents in rented accommodation, it’s vital all families think about the future and put financial plans in place, regardless of whether they are a home owner or not,’ she added. Aviva’s Family Finances report also reveals renting families are less happy with their homes. While 32% of home owning families with a mortgage feel emotionally attached to their home, this falls to just 18% of families who are private renters. The take-up of home contents insurance is also lower amongst renting families, with 42% owning this product compared to 81% of families with a mortgage. Unsurprisingly, the majority of renters have ambitions to move on. Only 4% of privately renting families want to stay in their current home for the rest of their lives versus 20% who own their home with a mortgage and 76% would like to become home owners in the future. However, the need to save for a deposit is the main barrier to the property market for today’s renters and 30% of families who rent privately say they cannot afford the deposit and fees associated with purchasing a house, equating to 775,800 households. On top of this some 574,500… Continue reading
Over half of UK home borrowers will struggle if interest rates rise, says new poll
Some 52% of borrowers in the UK believe they will struggle or fall behind with mortgage repayments when interest rates rise, according to new research published by the Building Societies Association. The survey has revealed that one tenth would experience real financial problems. A further 14% said they would be able keep up with repayments, but it would be a constant struggle, while almost a quarter, 23%, said that they would experience difficulty from time to time. When questioned about the impact on their lifestyle, 18% of borrowers said they will have to cut back on essentials such as food or clothing in order to make their monthly repayments. A further 15% said they will have to work more hours in order to keep on top of their mortgage commitments. ‘Concern from borrowers is natural when it comes to interest rate rises. There are at least 1.85 million home owners that have never experienced a rate rise, we have a record low Bank Base Rate for so long, it is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage repayments,’ said Paul Broadhead, head of mortgage policy at the BSA. ‘Clearly some of the actions borrowers say they would take may not be within their control, for example working additional hours. Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs. This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned,’ he explained. ‘The good news is that the results of our survey show nearly a quarter of borrowers will not have to make any changes to their lifestyle when interest rates rise. With the economy more stable than it has been for years, this is a positive result,’ he pointed out. ‘That said, with inflation near zero and the Monetary Policy Committee voting by a majority of eight to one to maintain the Bank Rate at 0.5%, it is looking unlikely that things will change before well into 2016,’ he added. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said that after years of low rates, borrowers’ minds are beginning to focus on the prospect of higher interest rates, and what this will mean for their finances. ‘Nevertheless, many mortgage payers are still in for a big financial shock when rates do start to climb and we remain concerned that many will fall into problem debt as a result. We must not forget that renters, too, are likely to be affected as extra mortgage costs are passed on by landlords,’ she explained. ‘Households now have a window of opportunity to re-assess their budgets, look again at their borrowing and think about how they will cope with higher interest rates. It is crucial… Continue reading
