Total Returns for Student Accommodation up 12.3% Year-on-Year

Capital values for student properties increased on an annual basis, according to the latest Student Accommodation Index by CBRE.

In the year to September 2018, capital values for student assets rose by 6.5%, surpassing last year’s growth of 4.5% in the same period.

Gross and net rents increased on an annual basis by 3.0% and 3.4% respectively, whilst total returns at a national level rose by 12.3%.

Separating the figures by region reveals that capital values in Central London were up 12.4% in the year to September 2018, bringing total returns to 17.5% compared to 14.2% last year.

Annual total returns for regional student accommodation for 2018 reached 10.5%, with a 4.5% increase in capital values.

The regional figures were additionally divided into Super Prime, Prime, and Secondary locations, which had capital growth of 11.1%, 6.0% and -9.0% respectively, whilst net rental value growth was positive in Super Prime (3.6%) and Prime (3.9%), compared to a 1.5% decline in Secondary locations.

Capital values increased for larger student accommodations of 500+ beds by 7.2%, bringing total returns to 12.9%.

Medium-sized properties (250-500 beds) reported a 6.2% growth in capital values and a 12.2% increase in total annual returns, whilst smaller properties of fewer than 250 beds had capital growth of 5.8% and total returns of 11.6%.

Commenting on the figures, CBRE’s Head of Student Accommodation Jo Winchester said, “This first published Student Accommodation Index demonstrates the continued strong performance of the sector which has outperformed the CBRE Monthly Index over the last 8 years.

“UK Student Accommodation is now firmly established as a mainstream investment sector. Investors will find the increasingly sophisticated raft of influences on performance highlighted by this index, including location, asset scale, university rankings, applications, and distance to university very informative.”

Average UK saver loses £500 in real terms as inflation eclipses interest rates

The average UK saver who kept their money in easy access bank accounts lost almost £500 in real terms last year because inflation has continued to outstrip interest rates, according to new research.

Despite the fact that inflation fell to a two-year low of 2.1 per cent in December, this is much higher than the Bank of England’s base interest rate of 0.75 per cent. Most banks fail to match the central bank’s rate with their easy access savings accounts, which offered an average of 0.23 per cent in 2018, according to figures compiled by Gatehouse Bank.

The research shows that savers relying on easy access accounts would have suffered a real terms loss of £19 on deposits of £1,000, £37 on savings of £2,000, £94 on a lump sum of £5,000 and £468 on £25,000.

Based on an average nest egg of £26,403, using the most recent figures from Sun Life, inflation would have led to a loss of £494.

Charles Haresnape, CEO of Gatehouse Bank, said: “Savings rates are slowly creeping up but inflation is still taking a huge bite out of savings held in easy access accounts. Millions of savers will undoubtedly have found that in 2018 they received a substantial negative ‘real’ return on their hard-earned savings, when the impact of inflation is taken in to account.

Savers keeping their money in cash would have lost out to an greater degree – the average nest egg would have lost £554.

“Those looking to drive a real increase in their savings need to be on the front foot in looking for better returns to prevent their nest eggs from shrinking. Many instant access savings rates are still at rock bottom and no one can afford to leave a significant amount of cash lying around for inflation to swoop on.

“There are many more accounts savers should consider, from fixed-term to notice accounts, which offer greater returns and won’t leave them as vulnerable to the impact of inflation, like easy access rates.”

Meanwhile, savers were dealt a double blow as analysts said the latest inflation data indicated the BoE could take its time over raising interest rates.

““With inflation within a whisker of its 2 per cent target, the [Bank of England’s Monetary Policy Committee] will probably feel comfortable in waiting until Brexit uncertainty is resolved before moving again,” said Ruth Gregory of Capital Economics.

Meanwhile, Howard Archer of the EY Item Club said: “We would not rule out two interest rate hikes in 2019 but we believe one is more likely as significant uncertainties persist – with expected lower inflation easing pressure for more aggressive Bank of England action.

Landlords are being taxed out of business, it is suggested

The majority of landlords in Britain are only paying the interest on their mortgages rather than paying off their loans, research suggest.

According to the National Landlords Association (NLA) some 79% of landlords are only servicing the interest on their mortgages and it is due to rising costs with many being taxed out of business.

The NLA points out that there are many costs to running a successful lettings business that tenants are even the wider industry are either unaware of or don’t consider.

‘There are myriad costs to running a letting business, including maintenance, repairs and upgrades, licensing, and insurance. Rents have to cover all these costs, as well as the interest on a mortgage, where there is one,’ said Richard Lambert, NLA chief executive officer.

‘Housing is expensive for everyone at present. The Government needs to encourage the supply of housing in all tenures, including the private rented sector,’ he added.

The NLA is calling for the Government to allow more time, five years, for existing policies in the private rented sector to bed in, and evaluate their effectiveness, before new policies and regulations are introduced.

It also suggests that the Government should be encouraging the building of more housing of all tenures by simplifying planning and borrowing rules.

Crucially, it says the Government should stop taxing professional landlords out of the market and argues that the loss of ‘good landlords’ will not make renting more affordable and will simply drive up the cost for those who want to access decent rented homes.