Britain’s student property investment may be about to burst as politicians work hard to shift the focus away from private landlords to larger property firms.
But the strategy may be doomed before getting underway as one of the largest student property investment funds runs into problems.
Dozens of councils have taken on extra powers to curb the spread of shared houses for students that they felt were threatening to overrun some neighbourhoods.
Along with student housing came complaints from residents about noise, rubbish, parking problems and antisocial behaviour.
Around 80 councils have taken on planning and licensing powers to combat the problems – with the result that 74% of landlords told a survey by buy to let lender Paragon Mortgages that they would not invest in areas where councils apply licensing schemes.
Lending black spots
Some buy to let lenders – notably Royal Bank of Scotland and subsidiary NatWest – have blacklisted licensing zones as no-go mortgage areas as they fear council policies are pushing down the prices of homes and make them difficult to sell.
Meanwhile, a report from property consultants Savills suggests councils should link up with developers to build student housing to unlock homes in their areas.
Savills reckons around 66,000 homes could be brought back into use for families in university cities across the country if councils took on the idea.
The proposal would also generate much-needed council tax revenues as students pay none but still soak up services like rubbish disposal that have to be financed from other sources.
However, the collapse of private student housing provider Opal group earlier in 2013 is upsetting the market. Opal operated around 10,000 student bed places in private halls of residents which are now up for sale.
That has doubled the amount of student beds for investors – to 20,000 valued at around £2 billion.
This has cause one student housing fund, Brandeaux, to suspend their funds and left investors high and dry – unable to cash in their funds because Brandeaux feels the ‘overhang’ of unsold student developments is pushing down the price of offerings from other firms.
Brandeaux trades as Liberty Living in Britain – which has around 17,000 student bed places.
“There is no reason for investors to panic or to worry that they have lost any money. All Brandeaux funds remain completely solvent and can meet all of their operational cash needs,” said a spokesman.