1hr and 59mins is the time it takes from Leeds Train Station
to London Kings Cross. Roll the clock
back 20 years, and to the London investor Leeds was just another provincial
city, north of Watford Gap and a place where nobody visited let alone invested.
However, since the turn of the Millennium, property investors from the South
have slowly but surely cast their eyes beyond the M25 and identified new parts
of the UK where they can get yields that are over twice, if not three times
higher than that can be achieved in London.
Coupled with competition from local landlords, the result
over the last few years has been an increasingly buoyant student property
market in Leeds, particularly in the last six months and particularly in the
prime locations of central Headingley and Hyde Park as demand has outstripped
supply. It has not been unusual in the
last few months for properties in these areas to be sold within days of coming
on the market for amounts at or above asking price.
This may seem surprising in view of the new Tory
government’s unexpected attack on the private landlord and the general Buy to
Let sector. You would have expected the
reduction of tax relief on mortgage interest for higher rate income tax payers,
coupled with the abolition of the annual 10% wear and tear allowance and higher
rates of stamp duty for BTL properties would have dampening demand, but
evidence on the ground would suggest quite the contrary with the student
property market in Leeds now stronger than ever. The obvious question is why?
Well, when
looking for the best city for your student Buy to Let, it is important to look
at two things ... total student numbers and what proportion of students are in
the private rented sector. Leeds scores
well on both counts, it is third only to London and Manchester in terms of
total numbers and ranks fourth behind Glasgow, Brighton and Southampton in
terms of the proportion of students renting in the private rented sector.
In real numbers that’s just over 60,000 students in total
with around 55% living in the private rental sector, with 30% in halls and 15% living
at home. As such, the city has a healthy
target market for those wanting to become student landlords or grow their
portfolio.
If you couple this with the fact that Leeds is one of the
few remaining university cities in the UK which still enjoys a 52 week rental
year, and that even with prices increasing at their current rate you can still
expect between 9 and 10% return on your investment, then we have a very strong
argument for investment in the student market in the city.
And whilst Leeds hasn’t seen the levels of capital growth
witnessed in London and the South East, across the general market property
values in Leeds have risen by 122% since January 2000. I would suggest that in the student market
values have risen by more as they not only mirror the general market, but are
also closely linked to rents which in broad terms have increased by 2-3% per
annum. This coupled with the somewhat
frenzied activity in the market since the summer as demand seems to be
completely outstripping the available supply, would suggest that capital growth
remains strong.
To go slightly off tangent, it is important to recognise the
impact of international students on Leeds.
One of the main themes of the General Election was for tighter migration
targets. Of the 58,000 students in Leeds, 6,000 of them are international
students. This is important, as
approximately just over a third of migrants who come to the UK do so for
formal study and it is essential that we recognise the important role they play
in university funding and the demand for student properties.
Having said all of the above, landlords new to the market must
realise that they can’t just buy ‘any old property’ in Headingley or Hyde Park
and expect it to be the answer to their buy to let dreams. It is important to buy in the right area,
obviously at the right price, maintain the property to a high spec, and perhaps
most importantly not get greedy by over populating the property. After all there is still a surplus of student
houses in Leeds, so if you don’t follow these principals then you may be left
with an empty student house or apartment come next October.
Many
landlords, some who use us to manage their properties, or who manage their own
properties, and even landlords who use other agents often email me or pick up
the phone for thoughts and opinions on what (or as importantly, what not) to
buy. At Springwell we don’t sell houses,
so can give impartial and thoughtful advice and opinion, even if sometimes it
might not be what you want to hear.
Feel free to give me a call but in the meantime, if
you’re interested in my ongoing thoughts on the market, keep visiting the blog to see what properties I think make a good investment.
