According to a new study, 2014 saw a significant rise in the number of silver landlords investing in student housing in the North West, a trend which is set to continue in 2015, with the new pension changes due in April.
The research, conducted by The Mistoria Group – leading student property investment specialists, reveals that there was more than a 20% increase in silver landlords buying student property during 2014 and a 20% increase in deposits taken in Q4, year on year.
It is estimated that 200,000 people will cash in their pension from April, when the new pension rules are introduced and that approximately 32,000 (16%) are expected to use the money to fund a property purchase, according to Ipsos Mori research.
Recent stats from Direct Line for Business also reveal that 32% of people aged 45 – 64 who have a pension, would consider using some or all of their funds to purchase a buy-to-let property, as an alternative to a traditional pension income funded by an annuity.
The North West is proving to be highly attractive for investors with the Northern powerhouses like Manchester, Salford and Liverpool outperforming all other cities in terms of rental yields. The recent announcement by Manchester City FC’s owner, Abu Dhabi United that they will be investing in 6,000 residential units in the vicinity of the Etihad stadium, 850 of which will be PRS, is in an indication of the trend.
Mish Liyanage, Managing Director of The Mistoria Group comments: “Very soon retirees will have the freedom to spend their pension, as they wish and we expect to see a further boost in demand for student property from would-be silver investors.
“For retirees looking to invest in buy-to-let property, London and the South East are a shining beacon calling out to them. However, when it comes to the reality of buying for profit, it’s actually better to look to the north, where entry levels are lower and the returns are higher than in the capital.
“Places like Barnsley and Manchester are fantastic examples of this. With average property prices in the north-west city of Manchester sitting at around just £135,000, it enjoys returns that can be more than two times the national average. The average rental yield in the city at the moment, according to HSBC, is 7.98%. Compare this to London, where expensive central areas like Fulham and Hammersmith are attracting yields of just 2.8%. It is easy to see why silver investors are looking north, away from the traditional safe haven of London.
“Over the last 5 years, student properties in the North West have generated yields in excess of
13% and geared yield in excess of 35% in Salford and Liverpool. Our research shows that the North West provides greater returns than any other city in the UK. This is fuelled by the massive regeneration taking place in Manchester, with the BBC moving its offices to Salford and the proposed High Speed 2 (HS2) high-speed railway between London Euston and the North West to be completed in the next 15-20 years.
“Investing in student accommodation offers retirees a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year. Typical rents are significantly higher for student properties, than a comparable buy-to-let property in the same city.
“A HMO (House in Multiple Occupation) property can provide an 8% minimum cash rental yield and a typical 13% total cash yield, including 5% capital appreciation. The average gross cash rental yields for the student property sector in the North West of England were 13% for the first three quarters of 2014, well ahead of the 6.37%* forecast for average student property yields across the UK, for this year.
“Since the birth of the buy-to-let mortgage 18 years ago, student accommodation has outperformed all other traditional property assets and has been the strongest growing investment property market in the UK.”
– Mistoria Group was formed in 2009 by entrepreneur, Mish Liyanage. Together with a group of highly qualified, successful property professionals, he ensures that each client receives a bespoke solution tailored to their specific property needs.
– The Company consists of a selection of customised companies dedicated to servicing the needs of clients who demand the best possible results in all areas of property investment, and as such, are able to offer a ‘one stop shop’ solution to their needs.
This article first appeared on the Landlord Zone website on 9th January 2015.