Category: (10)

There is some doubt as to the ability of the UK to build a million new homes by 2020.

The pledge is at the heart of the government’s landmark Housing & Planning Bill, which received Royal Assent earlier this month. However, a recent survey of owners and directors of 389 housebuilders across England indicated that just over half (51%) thought the target would not be met.

Ralph Wyrley-Birch, Managing Partner at Mount & Minster Chartered Surveyors, says: “The danger is that the planning pessimists out there will create a self-fulfilling prophecy. A million homes by 2020 is perfectly possible – as the Home Builders Federation have stated quite clearly. However, it will need conviction and commitment, as well as further government policies in favour of development, and help to speed up the planning process. If the government give the developers the means to achieve this, there is no reason why we can’t hit that target. The changes in policy that need to be implemented need to happen very quickly however. Currently, there is little surprise as to skepticism from house builders.”

The UK has already seen huge increases in output, with build rates on large sites doubling since 2010. There were more than 180,000 new homes delivered in 2014/15, with this year’s figure expected to be higher still. And by 2019 the big companies will be building double what they did six years ago. Now we need to speed up the momentum even further, so that we ensure we reach the target of one million new homes by 2020.

Despite his optimism, Mr Wyrley-Birch says that the industry needs to see more land coming through the planning system, and processes that support both large and smaller house builders.

He explained: “Several significant advances have happened already. Brownfield sites will now automatically be approved for building, with £10m worth of funding to help local authorities, such as Lincoln City, West Lindsey and North Kesteven, to prepare them. There are also plans to relax the planning rules for smaller house builders, enabling them to gain automatic planning permission on suitable sites. Furthermore, changes to the section 106 agreement will enable developers to provide affordable homes to buy, instead of affordable homes for rent.”

It is most likely that local councils – the largest landowners in the country – will be key to the success of this project. They must get up-to-date housing plans in place, ensuring that they are robust and evidence-based. They should review their planning application process and the conditions attached to planning which represent such a major challenge for developers. Plus they need to streamline their planning processes and improve communication so that once approved, building can get underway quickly.

For their part, house builders are already investing in their supply chains and have taken on tens of thousands of new workers to ensure there is the capacity and skills required. All we need now is the conviction of the government and it’s local authorities to carry it off.

Thinking of selling? Already on the market? Make sure your next decision is a wise one, it can help you realise thousand of pounds more and ensure a quick, stress free sale.

Picking the right estate agent to market your home can make a difference, not only to the price, but to the overall experience. The following five top tips for consumers will help you get the best out of estate agents:

1. Do your research

Look at their website – are the pictures well taken and how are the adverts written? Will they market your property on portals such as OnTheMarket and Rightmove? This information is vital in the early stages. Ask the agent if they can put you in touch with recent vendors to get an idea as to their success and service.

2. Local knowledge –

Look to use a company with good knowledge of your local area. They should also have a high profile where you live. This should ensure that the estate agent will present you with the right choices that fit your preferences. Try to ensure they have a national presence too. A London office will allow your agent to push your property under the noses of wealthier buyers down south who regard Lincolnshire as good value compared to the south.

3. Get personal –

Meet face-to-face if possible to discuss your requirements and be strict about these. This will ensure they clearly understand what you want, and don’t want from your home. Inspect their offices, they should be a fair reflection of the type of property they sell.

4. Be prepared –

Prepare a list of questions to ask when viewing properties and ensure that you make a note of the answers!

5. Open communication –

Make sure you clarify how often they will communicate with you during the process and ask whether they can attend viewings with you. They should be able to contact you via phone, text or email so tell them what you would prefer.

estate-agents-439449Research by Mount & Minster has revealed that despite using online services for property searches, UK consumers value estate agency expertise and want life-long relationships with estate agents.

The study explores the attitudes, perceptions and expectations that UK home buyers have towards ‘bricks and mortar’ estate agents and online tools. It uncovers the true value consumers hold for the knowledge and expertise estate agents offer.

Whilst the majority of respondents (93%) search for properties online, half (54%) admitted that they would use a mixture of online tools and estate agents to deal with the entire property buying process.

A staggering, 82% of UK home buyers would actually prefer to have a personal agent who can deal with the whole management of the home buying process. Those surveyed also admitted to relying heavily on estate agents’ expertise for key parts of the home buying process including: conveyancing (72%), to arrange viewings and inspect properties (62%), make an offer (53%) and for financial negotiations (42%).

Ralph Wyrley-Birch, Managing Partner at Mount & Minster, had this to say: “It’s clear that UK consumers will never quite give up on servitude as a measure of their worth. Buying or selling a home can be an extremely stressful and daunting process and good quality customer service still carries a huge amount of weight. Estate agents are well placed to offer sound, expert advice. They can help to alleviate some of the pressures and concerns that consumers have with managing the process themselves.”

Lincolnshire buyers and sellers are experiencing some interesting trends that are mirroring consumer activity on the high street. Whilst many people like to be able to search online, they clearly value the customer experience and human touch of face-to-face interactions. However, without the personal touch online only services aren’t necessarily going to be in the position to replace traditional agents.

The research has revealed some danger areas for estate agents, it highlights consumer frustration with agents who are slower to adopt newer digital technologies. Two-thirds (67%) of respondents believe that estate agents are not fully using technology to their advantage and 44% strongly agree that estate agents need to adopt, and embrace technology, in order to survive in the future. Fortunately, as Mr Wyrley-Birch points out, Mount & Minster not only adopt High Definition photography, but also images and videos using 21st century drones. Their website is also highly respected and simple to use on desktop and mobile devices.

James Ward, another Partner at the firm, says: “There is a real appetite for change from both estate agents and consumers, especially when it comes to the use of technology. Advancements in technology, from mobile devices to cloud-based software offer some amazing opportunities for the estate agent of the future. It gives them greater accessibility and freedom, and helps them to alleviate some of the pressures experienced by home buyers and sellers. There’s a breadth of technology that can help transform the property industry and enable agents to deliver a professional and personal service across human and digital touchpoints. In order to survive, and thrive, estate agents must recognise and remain confident, that they too have the tools available to remain competitive and keep customers satisfied. Mount & Minster embrace this challenge and in a very short period of time are already regarded as being game changers in the East Midlands.

 

RENTS AT THEIR HIGHEST

Rents are accelerating at the fastest pace since last autumn, reaching the highest levels seen so far this year, according to Mount & Minster letting agents in Lincoln.

Average rents for homes to let across England & Wales have now reached £793 per month, as of April 2016. On a month-on-month basis this represents an increase of 0.3% – or the fastest monthly rent rises since September 2015.

This leaves rents 2.4% higher than at the same point last year – or an extra £19 every month for the average tenant. For the East Midlands, including Lincolnshire, this figure is even higher at 8.3%.

A strong acceleration in market rents comes on the back of what was previously a relatively subdued month, when rents saw no change between February and March 2016.

James Ward, Partner at Mount & Minster, comments: “Anyone looking for a home to rent may now find the better deals of the winter months are over. Landlords are seeing renewed interest and competition between potential tenants, as the spring rental market accelerates.”

Some of the reasons for rent rises are extremely encouraging. Tenants looking to find a property to rent are more likely to be in work, getting pay rises, and feeling able to pay their other bills. These wider economic fundamentals are shifting on the side of healthier household finances.

However, very little has changed in terms of the supply of homes to let. Therefore, for many tenants, it is likely that a large proportion of any earnings growth is swallowed up by higher rents. The Government hasn’t helped by imposing an extra bill that someone will have to pay on top of this – in the form of the recent Stamp Duty Surcharge. To a large extent it is likely that penalty will be shouldered by those tenants looking for homes to rent, due only to the fundamentals of supply and demand in the British housing market.

Lincoln letting agentsThree-in-ten regions see new all-time records

Rental markets in the East Midlands, West Midlands and East of England have never seen rents higher.

Second only to London in absolute terms, rents in the East of England has seen a new all-time record of £848 in April, on the back of 4.8% rent rises over the last year. Second in terms of annual rent rises, up 6.2% on last April, the West Midlands is now home to average rents breaking through the £600 per month barrier.

However, leading England & Wales by some distance, property to rent in the East Midlands has seen annual rent rises of 8.5%. This takes rents in the region to a new all-time record of £616 as of April.

On a monthly basis, the fastest increases in rents were seen jointly in the East of England and the South East, both seeing rents rise by 1.0% just between March and April. The North East property market follows by this month-on-month measure, with rents now 0.8% higher than in March 2016. In all three of these regions the latest monthly rent rises represent an acceleration compared to relatively more subdued rises previously this year.

Returns and yields

Taking into account both rental income and capital growth, but before property-specific costs such as maintenance, the average existing landlord in England and Wales has seen total returns of 10.7% over the twelve months to April.
This is slightly lower than 11.4% seen a month before, over the twelve months to March, but higher than 9.8% returns over the twelve months ending last April in 2015.

In absolute terms this means that the average landlord in England and Wales has seen a return of £19,538 over the last twelve months, before any deductions such as property maintenance and mortgage payments. Of this, the average capital gain contributed £10,815 while rental income made up £8,723 over the twelve months to April.

While a recent surge in capital values has boosted total returns for existing landlords, the same trend has suppressed rental yields a little for those aspiring to become landlords, or professional landlords looking to grow their property portfolio. As rents rise alongside property prices, rental yields are proving reasonably resistant to rising purchase prices. However the gross yield on a typical rental property in England and Wales (before taking into account factors such as void periods) is now 4.9% as of April 2016, compared to 5.1% in April 2015.

Mr Ward continues: “Yields and returns have been remarkably steady in the face of an onslaught of hostile rhetoric and regulatory hoops. And all else being the same, there is a chance gross yields could rise marginally, to take account of any extra costs and complexities associated with being a landlord – such as the Stamp Duty Surcharge.”

More change is on the way, and landlords will need to take appropriate financial advice on how changes to the tax system could affect them – as well as ensuring that their properties and tenancy agreements comply with every single rule and requirement. This latest imposition is actually not a tax on existing or accidental landlords. Actually, the Stamp Duty Surcharge is a barrier to entry. The danger for tenants is that this new rule will prevent new houses and flats to rent coming on to the market. The advantage for landlords in some areas could be less competition. However, anyone trying to grow their rental portfolio will now need to spend even more time making the right decision – and as of last month more money too.

Paying the rent is becoming slightly easier for tenants

Tenants across England & Wales are now finding it slightly easier to pay the rent on time. As of April 8.1% of all rent due in the month was in arrears, compared to 9.1% in March. However this still represents a more challenging situation than at this point in 2015, when tenants were behind with only 7.0% of rent due in April last year.

In a longer-term context, the latest improvement remains extremely encouraging. April still compares very favourably to the all-time high of 14.6% of all rent payable in arrears – set in February 2010.

All the signs are right for a strong improvement in tenant finances. Wages are finally showing a bit of exuberance and employment has never been higher. But rents haven’t ever been higher either in much of the country. There is a powerful trend underpinning the affordability of renting for a large majority of Britain’s tenants, but there are also serious shortages of homes to let in all the same places that people want to live.

Rental arrears reflect this mismatch between supply and demand. Waves of interest from the bulk of financially healthy tenants are capable of pushing up rents across the market. But unless landlords are allowed to respond by investing in new homes then supply will not quite ever be able to keep up. This is the mechanism that very soon could demonstrate the misguided nature of the latest targeting of landlords from the UK authorities. Tenants will always lose out if the bottom line is a shortage of flats to rent or houses to rent in local markets.

For details as to how Mount & Minster can help you and your portfolio, please contact our Lincoln office on 01522 716204 or email info@mountandminster.co.uk

Prime markets in the UK have enjoyed a busy start to 2016. One of the key questions for the market is whether this momentum will be maintained for the remainder of this year.

Prices have been rising in the prime country house market for 13 consecutive quarters, the longest period of sustained quarterly price growth since before 2007. But despite this relatively prolonged period of unbroken growth, prime property prices outside of the capital still remain 13.6% below their 2007 levels, with Lincolnshire specifically at closer to 16% lower. By way of comparison, London values are some 33% above their pre-crisis peak.

More recently, over the year to the end of March 2016 price growth in the prime markets outside of London has slowed to 2.4%, down from 5.2% in 2014.

The moderation in price growth reflects a greater sensitivity to pricing from buyers who are continuing to adjust to a different tax landscape. In some cases asking prices have had to be reduced to align with buyer expectations.

However, these headline figures do mask significant variations across the market. The most active markets continue to be prime town and city locations with excellent transport links back to the capital which have been among the first to benefit from the ripple effect of demand out of London.

2000px-Lincolnshire_flag.svgAs regional economies continue to recover and the London housing market remains subdued, more London buyers are likely to make the move out of the capital. This trend has already begun to gather pace. There was a 46% increase in sales to Londoners over the first quarter of 2016 compared to the previous year.

Following recent tax changes, demand has generally been concentrated on lower price brackets. However, there are initial indications that the stamp duty increase in December 2014 is slowly being absorbed, with the higher transactional costs being factored into pricing at the outset. But taxation remains a live issue. The 3% surcharge for additional homes which came into effect from April means that prime second-home markets are likely to remain price sensitive.

Agents note that there was a spike in second-home sales ahead of the introduction of the additional levy.

In the short term, uncertainty surrounding the outcome of the EU referendum could have an impact on the market, causing some buyers to adopt a wait-and-see approach until after the vote.

Ralph Wyrley-Birch, Managing Partner at Mount & Minster chartered surveyors and estate agents in Lincoln, comments: “Since the financial crisis there has been a growing trend towards living within thriving towns and cities other than London. This has resulted in prime urban properties outperforming their rural counterparts across the UK. Across all the prime regional markets, urban properties are now on average 4.1% above their 2007 peak. Demand is strong in these locations, in part due to the high concentration of prime housing stock and good schools which make them attractive to families looking to upsize, but also thanks to a growing number of equity-rich downsizers looking to move to areas where they can have access to a range of good restaurants, shops and amenities.”

Costs are greatest in markets on the outskirts of the capital such as Elmbridge, St Albans and Guildford – perhaps unsurprisingly given average property prices tend to be higher in such locations. These markets have also been among the first to reap the benefits of the ripple effect of demand coming out of London. As regional economies continue to recover, more London buyers are expected to make this move. Lincolnshire is already seeing this tide of southern buyers making their way to our region, with excellent train links at both Grantham and Newark.

According to a new report, five new village tribes have been identified amid the emergence of a new creeping trend in housing – the desire to move back to rural locations.

Through speaking with industry experts and conducting an extensive survey with 2,600 respondents, research has uncovered some new and interesting housing personas that are growing in the UK and moving to a village near you:

The Downtons

An influential family with substantial income living in the grandest village house. While the most prestigious house in the village would once have been owned by the local squire, many of these properties have now been acquired by buyers using property equity to purchase a rural idyll.

The Elderflowers

Healthy and active retirees who have assets, including their own home and pension income. Born after the Second World War, the Elderflowers have benefitted from sustained economic growth and are now the largest demographic in the UK. Elderflowers have either lived in the village all their lives or are empty nesters looking to move into a village house that suits their changing needs.

The Rusticarians

Entrepreneurs and creatives who can bring dynamism to the village economy. These diverse countryside dwellers embrace new approaches to work and lifestyle. For example, rural areas have the highest rate of homeworkers – 33% compared to 12% in urban areas. Technology is key to this group, with 49% of those intending to move to a village citing broadband as the key motivation for moving, up from 41% in 2014.

The Rubies

…or Rural Newbies –  families who are keen to move to a village location to raise their children. This group of predominantly younger families supports the local school, uses community facilities for classes and leisure facilities, and sustains local shops.

The Onesies

Single-person households which are growing across all age groups in the UK at a rate ten times faster than the general population. About 3.8 million older people are sole occupiers and 70% of these are women.

Mount & Minster VillageJames Ward, Partner at Mount & Minster estate agents in Lincoln, said: “The face of the modern village is changing as new demographic groups play key roles in shaping the future of rural life.”

The Downtons are certainly a village tribe that are familiar to Mount & Minster. Of our clients who are buying outside of London in the £2 million-plus bracket, 98% say they would want the property to be a house or an estate/farm estate. Many of our clients are also Elderflowers, who arguably have more potential power to shape the village of the future than any other village tribe; by 2033, 60% of household growth will be headed by those aged 65 or over.

Rusticarians are part of an exciting new group of wider rural entrepreneurs and homeworkers with a reliance on technology, who will play a crucial part in the evolution of the modern village. Surprisingly, entrepreneurs are most prevalent in the countryside than in cities. Research from DEFRA in 2015, points out that the number of businesses registered per head of population is higher in predominantly rural areas than predominantly urban ones.”

Affordability of housing is a well-documented issue but much of the media coverage on the topic tends to focus around London. In fact, the situation in some rural locations is just as concerning. Rubies are particularly exposed to this. In England, 59% of those aged 25-34 owned their own home in 2003/4 and 10 years later this figure was just 36%. The good news is that Help to Buy is having a positive impact on this tribe.

The Onesies are also a very important, often overlooked tribe to consider in non-urban locations. The challenge for planners in rural areas is to provide suitable housing options for these single people, who quite often want to downsize but are seeking a more spacious option than a typical one-bedroom flat.

The latest Buy-to-Let Index from LendInvest, has revealed the huge opportunities available to landlords who look beyond London and the South East.

Cathedral_Lincoln11Taking into account their stamp duty bills after recent tax changes, alongside average house prices and average rental yields, the Index looks at what property investors can buy across the country for a range of different budgets (£250,000, £500,000, £750,000 & £1 million).

All price brackets, rental properties in Inner and Outer London offer consistently less attractive investment opportunities to those in other parts of the country when price, yield and stamp duty tax are considered equally.

Buying multiple properties, particularly in Lincolnshire, will often generate the same or better rental yields, while demanding as much as 50% less stamp duty, compared with one property in Inner London that costs the same.

Data-driven examples:

• For £250,000, investors could buy a single studio flat in South East London or two 3-bed properties in Lincoln with a 200% higher rental yield and 30% lower Stamp Duty bill

• Spending £500,000 in Gainsborough would secure a landlord five two-bed properties with an average rental yield 40% higher than the average one-bed flat in West London, while paying almost 50% less Stamp Duty

• Ten studios in Grimsby cost less than one three bed house in NW London (£750,000), while earning a 28% higher average annual yield and demanding 55% less stamp duty

• For landlords with £1 million to invest, ten two-bed flats in Lincoln would earn 20% higher annual yield for less than 50% the stamp duty than the same size apartment in East-Central London.

Ralph Wyrley-Birch, Managing Partner at Mount & Minster estate agents in Lincoln, said: “London rentals have long been seen as a market within a market, and the results of this study emphasise that fact. It’s no surprise that you can get as many as 10 similarly-sized properties in Lincolnshire for the same price as a single property in London. But it is surprising that those non-capital properties offer a far more impressive rental yield, and a smaller total Stamp Duty bill to boot.”

Mr Wyrley-Birch goes on to say, “The current market is creating a huge opportunity for “cross-country landlords” – professional landlords who live in one city, but rent out houses in other cities across the UK. Towns like like Grantham and Newark are becoming more popular with commuters thanks to the transport links into London, providing an additional boost to areas in the East Midlands and beyond.”

According to a recent housing pipeline report, initial planning permission for 255,032 new homes was granted in England in last year – up 57% from a low point of 162,204 in 2009.

Permissions granted in Q4 2015 were up 13% on the same quarter in 2014, to 74,759, as developers submitted more applications to ensure they can continue to deliver further increases in supply.

Permissions have risen steadily every year since 2009, with actual housing supply also increasingly markedly over the past two years as more of the permissions are progressed to the point that infrastructure work can start and house builders can begin building new dwellings

Over 180,000 new homes were added to the housing stock in 2014/15 – up 22% on the previous year – as house builders increased output in response to the rise in demand for new homes.

mount and minster planning surveyors lincolnMany of the permissions counted in the report still have many hurdles to cross as they navigate the complexities of the planning system before actual building work can get underway – for example discharging planning conditions. The industry continues to urge Government to streamline the planning process and ensure Local Authorities have the capacity to deal with the volume of applications now being processed so builders can get on to more sites more quickly.

The figures though are a strong indicator of future supply, and suggest that housing completions will continue to rise as these permissions are turned into implementable permission and are the sites built out over the coming years.

Ralph Wyrley-Birch, Managing Partner at Mount & Minster Chartered Surveyors in Lincoln, said; “The number of planning applications now being submitted demonstrates the commitment of the industry to deliver further increases in housing supply. The past two years have seen huge increases in house building levels, with housing supply in England surpassing 180,000 homes per year in 2014-15, up 22% on the previous year. Whilst the increase in the number of permissions is welcome – and a strong indicator of future supply – many still have to navigate the complexities of the planning system. This is a further sign that house builders continue to step up investment in future housing supply but we need to see these permissions being processed to the stage where we can get onto site and start building more quickly and really start to meet demand for housing.”

The strong rise in planning approvals during the closing months of 2015, driven by an increase in the number of private housing units approved, bodes well for housebuilding activity during the current year. The expanded development pipeline will help housebuilders to meet any strengthening in demand from house buyers. Furthermore the rise marked rise in approvals in the Midlands and North of England last year demonstrates that the recovery in housing market activity is becoming more established across the country.

For advice relating to planning and development in Lincolnshire, please feel free to contact Mount & Minster on 01522 716204.

People find themselves in the role of landlord for many different reasons, and often this is not something they have planned for.

Reasons may include inheriting a property, inability to sell, or a relative going into care and leaving their home empty. Whatever the reason, renting a property out can seem like an ideal solution. Gethyn Evans, an Associate at Mount & Minster estate agents in Lincoln, comments “If someone is unable to sell a property and decides to rent it instead they need to be fully aware of the implications. Once a landlord has committed to a tenant taking on a property, say for six months, they are bound by that agreement.”

Preparation

Prior to renting the property out, take time to prepare it. Go in to the property with your eyes wide open, and emotionally detach as much as possible. This can be difficult if it has been a family home for many years. Try and view the property as a mini-business and consider getting rid of things such as floral carpets and wallpaper, and replacing them with something neutral. Consider getting rid of unnecessary items such as stair lifts, and to get all the electrics checked over to ensure that they have the relevant electric and gas safety certificates in place, as required by law.

Safety

The safety of tenants is paramount, so look around the house and garden with a critical eye. For example, if there is a steep drop off a patio that a child could fall down you may need to fence this off, and similarly it may be better to fill in a pond, as tenants may not have the time to maintain it and there may be safety concerns if they have pets or small children.

Once you have identified anything that may be unsafe or off-putting you can take steps to rectify them. The legislation surrounding the rental market is changing all the time, but a good letting agent such as Mount & Minster can provide all the necessary advice to bring a property up to the required standard, and keep landlords on the right side of the law. They can also help you to find tenants, deal with references, prepare inventories, do viewings, collect rents and deposits and sort out any maintenance issues as well as periodically visit the property to ensure it is being looked after. A good letting agent will be worth their weight in gold.

Raising Standards

The quality and standard of rental properties has increased dramatically in the last 20 years. An accidental landlord should not make the mistake of thinking that renting is a second-rate option, because for many people it is a lifestyle choice and there is a fantastic supply of good quality property for tenants to choose from. If your rental property is not in good condition it won’t rent out as quickly and tenants are likely to leave more quickly.

Letting Agents LincolnProfessional Advice

Always approach a firm such as Mount & Minster to obtain some professional advice. Put your business hat on and look at your home as a business/investment. When an agent does a property appraisal, they should recommend whatever needs to be done to help you secure better quality tenants. Equally, thy will advise landlords if they think they are about to undertake a lot of unnecessary work and expense. For example, some people think they must rush out to a major department store and buy expensive beds and washing machine when it may be much better to buy less expensive, but good quality appliances online.

A professional and reputable agent such as Mount & Minster will want to help their clients make profits and see good yields. It is our job to help landlords deal with the pitfalls of renting and make the experience as stress free as possible.

 

We all know that student accommodation in the UK is booming and recent figures reveal £5.8bn was pumped into the market last year and private, student room developments continue to spring up on prime city centre sites.

These blocks of high spec, boutique rooms with en-suites and flat screen TVs are indistinguishable from residential flats, except for the branding that promises a ‘boutique’ or ‘luxury’ student experience. Since 2006, the private sector has gone from providing 18% of bed spaces to 41%. The latest NUS-Unipol survey shows the average weekly rent for student accommodation in the UK now stands at £147, an 18% increase since 2012-13.

Ralph Wyrley-Birch, Managing Partner at Lincoln estate agents Mount & Minster, comments: “Student numbers are expected to increase for the foreseeable future, especially since George Osborne lifted the cap on how many each university can take. The latest UCAS figures show a 0.2% rise in applicants to higher education institutions for 2016/17, mainly due to a 6% rise from EU countries.”

However, investors need to be fully aware of the pitfalls of student rooms before they invest their hard-earned cash.

Lincoln estate agentsMr Wyrley-Birch continues: “If investors are considering student rooms, otherwise known as student pods, they need to look at not only the opportunity, but also the risks too. Unfortunately a major disadvantage of student pods is their resale value and capital growth potential. The value of property will fluctuate with the market and the pool of potential investors is much smaller than for other types of student accommodation, such as HMOs and flats.

“With a normal buy-to-let, you can sell the property at any time on the open market, through a reputable estate agent such as Mount & Minster in Lincoln, and expect a reasonable capital appreciation. However, selling a student pod will encounter problems. For example, who decides the market value? As a piece of real estate per sqm it is very expensive (double the average market value), there is no established resale market.”

There is also the issue of guaranteed returns of 7%. The guarantees are only as good as the person, or firm that is promising it. Investors need to weigh up whether that think providers of student pods are robust enough to stand behind the guarantee. They also need to be aware that the 7% guarantee may not stand in five years’ time, when their investment could have devalued as new developments have been released.

However, despite the big pitfalls of student pods, student property is a very profitable asset class giving robust returns. For example, in the North West a high quality HMO which will house four students, can be purchased for £160,000. The return on investment is very attractive too, with 13% (8% cash rental and 5% capital growth). Unlike student pods, you can apply for a remortgage and there is a buoyant market for this type of student property. If you are building a portfolio, you can lend on your equity in the HMO to fund further investments.

According to new research, one of the top 10 mortgage lenders in the UK is now ‘The Bank of Mum and Dad’ and is on track to lend over £5bn in 2016.

Mount and minster estate agents lincolnThe research revealed that family and friends will be involved in a quarter of all UK property transactions during 2016, providing deposits for over 300,000 mortgages. The average financial contribution is £17,500 or 7% of the average purchase price. 57% of contributions are gifts, 18% are loans with no interest and 5% are loans with interest.

James Ward, Partner at Mount & Minster estate agents in Lincoln, commented: “The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder. But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains. People will always want to help family members – it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad however risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy even with parental help.”

Mr Ward continued: “We have a supply-side problem in housing – we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own.”

For further information relating to financing your real estate acquisition, as well as details relating to government aided funding, please contact Mount & Minster: 01522 716204