July 4th, 2016
It’s been a recurring theme and concern in the media over the last few years. Just how will young people get on to the housing ladder? How will they afford to save up a deposit? Is there a big enough stock to satisfy the demand out there?
All valid questions for sure but more often than not annalists are quick to point out the problem with no sign of a proposed solution. The latest figures released show that house prices are just short of ten times the average income in the UK, doubling in just nine years. Wage growth and the economy have stayed pretty stagnant for almost a decade now with other household costs increasing significantly. Low paying jobs are on the increase whilst highly skilled, well paid careers are becoming more difficult to enter at the bottom. Almost any well paid career now requires graduate level qualifications and those that do not pay severely low wages in the form of apprenticeships.
In summary then, in order for young people to earn the salaries they require to enter the market as first-time-buyers they need to attend university or save an astronomical proportion of their income each month. There’s a problem though as the government have announced cuts to student finance grants meaning that all students from next year will have to repay every penny of their student loans and living grants.Thankfully this hasn’t had a noticeable effect (yet) and the market continues to thrive, with first time buyers still managing to get on to the market in ever decreasing numbers. A new solution may be on the horizon though as purpose built student accommodation not only makes money for investors but also relieves pressure from the housing stocks.
The simple argument is that in towns where the student population has increased very quickly the housing stock struggles to cope with demand and as such prices increase much quicker than they would have normally.In these cases private companies building purpose built accommodation allows students to get more appropriate housing and keeps the normal properties free for first-time-buyers. This in turn allows ,prices to stay stable and keeps the market from over-inflation. As student accommodation increases massively in quality and popularity so too does the investment that it requires to thrive. Yields are often stable and high with demand always high as student populations soar. The government recently lifted the cap on the amount of students that universities can accept and this has meant a huge surge in applications.
With high demand construction of student ‘pods’ has increased massively and opportunities for investors has gone up with it. Most investors enjoy the fact that student pods are often half the price of normal off plan properties so require less capital and means they can diversify their portfolio more than they would have been able to normally.Towns that were previously struggling for a post-industrial future are thriving once again and student accommodation and universities are driving that growth by bringing high spending students to the area. As young people struggle more and more for affordable housing perhaps a small contribution to the solution could be building more student housing to attract students and investors as well as freeing up housing stock for first-time-buyers.