Purchasing student property for your bright offspring studying at university is quickly becoming an increasingly popular, and very smart, trend in the high net worth property space.
Despite Brexit initially rocking the London property market boat, recent indicators suggest that whilst prices remain high, market concerns are calming down. For international parents looking to find a London nest for their child, the time now is right as the resultant drop in sterling following the referendum has made UK capital attractive again. Whilst on home soil, a September poll from the National Association of Estate Agents recorded a 16% rise in house buyer demand, taking levels back to their previous state prior to the referendum. As the Brexit dust settles, buyer confidence both home and abroad has begun to restore, just in time for the commencement of university courses in the UK.
So what are the benefits for high net worth individuals who are buying student property for their children, and leaving the dark days of rented student digs behind?
Avoid the fiercely competitive and turbulent realm of renting
The Independent reported in September that ‘student rents have risen by as much as 10% this year, following warnings of a critical shortage in student housing across the country.’ Further research also found on average in London university areas, five students at any one time could be in fierce competition for one room. As Spareroom.com argue the majority of the renting problem is an inherent landlord aversion to student tenants, there is no question high net worth clients could avoid the stress, disappointment and dead money which plagues renting by purchasing a property instead.
Hugh Wade-Jones, Managing Director of Enness Private Clients, recently spoke to the Financial Times about a high net worth mortgage he arranged for a Middle Eastern family. They were most particular in Knightsbridge being the ‘only place for their daughter to live in’, no matter what the cost. On the rental market, their daughter would have a limited choice given competition for rented accommodation and in such a limited search area. Instead, with Hugh’s help, the family secured a mortgage for a ‘beautiful three-bedroom, 3,500 square foot new-build, a stone’s throw from Harrods’ worth just shy of £12million.
A student property isn’t just for Christmas
Although your child would certainly benefit from avoiding eye-watering London rent prices for the duration of their studies, purchasing a property in London for your child is so much more than simply student accommodation – it’s an investment.
Enness arranged a multi-million pound mortgage last year for an Australian billionaire in Pimlico. Although his son wasn’t going to university for a few more years, the client could not ignore the investment opportunity to expand his own property portfolio.
It seems now is the time to expand a portfolio in London University areas, as The Financial Times have reported an increase in newly built student accommodation, such as ‘high-end one-bedroom apartments on the Strand which typically sell for between £1.2million and £1.7million’.
Buy to Let opportunity
If you were to purchase the property as a second home, there would be an opportunity to switch over to a buy to let mortgage if your child were to vacate following their studies. This would offer the potential to earn your income in two different ways. One way would be through the rent paid by tenants, and the other through capital growth – which in London would be great as regenerative areas are increasingly in demand, causing rental yields and property prices to rise.
At Enness, we take the time to understand your circumstances and find you the best buy to let products offered by lenders on the market. One lender whom we work closely with for example, has recently revealed a multitude of newly rate cuts, including selected two, three and five year fixed deals for buy to let mortgages and for residential mortgages up to 0.6%. The new reductions are designed to ensure attractive options remain for both purchase and remortgage customers on residential or buy to let properties for a range of different deposit levels.
If you’re looking to purchase the apple of your eye a home whilst they study, but also want to understand the benefits for you, please do get in touch. Our specialist brokers have significant experience in this area and would be delighted to help you find the best possible solution.