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Student digs: investing in new, old, or not at all?

Student digs: investing in new, old, or not at all?

Student residences sold unit by unit by developers are on the rise. Their assets: high return, sometimes guaranteed, relatively small investment, optimal well-being for students and ideal location. But there are risks on this market, as on that of ‘old-style’ student digs.

1. Supply could exceed demand
With the arrival of large-scale operators on the student accommodation market, supply currently seems to be keeping up with demand, or very nearly so. According to Nicolas Vincent, co-founder of BuyerSide, “it is even becoming a little worrying at Delta (one of the ULB campuses): I would no longer push an investor, given the many student residences to be found there now.”

2. Price competition
If the supply is sufficient, “competition will occur between the players, ultimately putting pressure on prices.” And therefore pressure on returns, whether it is a matter of digs in a residence or in an old building. “The competition does not just come from student residences: flat-sharing, for which there are now specific leases in Wallonia and Brussels, is sometimes less expensive than student digs.”

3. The new student lease
Wallonia and the Brussels-Capital Region have recently introduced the student lease into their housing code. Adrian Devos, BuyerSide partner: “This lease offers students the advantage of flexibility, particularly as regards the early termination of the lease. Any rental vacancy created by this termination impacts directly on the return. However, this problem does not arise with guaranteed return investment products.

4. The return on student digs compared with an apartment
In comparison with the price of apartments, Nicolas Vincent believes that student residences sold to private individuals unit by unit are relatively expensive. “Moreover, the return, when guaranteed, usually lies between 3.5 and 4% gross, whereas for conventional apartments you would be aiming for 4 to 4.5%.”

5. The reliability of the property manager
When buying student digs unit by unit in a residence, the question is whether the operator will continue to invest correctly. It cannot be ruled out that in ten to fifteen years’ time, the joint owners have to consent to major renovation expenses which will eat into the return they have obtained in previous years. What is more, it can sometimes be difficult to reach agreement with the other joint owners on the investment to be made in the communal areas.

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Source: L’Echo