Financial Problems Stack up for Student Pod Investors
Student pods can turn out as poor investments – with returns and prices failing to stack up against other property investments, claims a leading developer.
Student pods are single room investments in private university halls.
The self-contained rooms are slammed as expensive and unlikely to perform as promised when developer incentives run out.
An added problem is the pods are difficult to sell.
Developer FreshStart Living sold student pods to investors but has pulled out of the market after hammering out a deal with 70 angry investors who wanted compensation for unpaid rents.
“The guarantees offered by developers are rarely sustainable,” Charlie Cunningham, the firm’s chief executive, told the Financial Times.
“Investors are often left with a useless property from which they will not only struggle to generate a reasonable income but they will also struggle to resell.”
Mr Cunningham called for tighter regulation of the market, noting “people investing in property are not that sophisticated”.
Mr Cunningham and other property experts accuse developers of taking advantage of financially naïve investors when selling student pods.
Investors to look at returns and are often in denial over the high prices they are paying, they claim.
Initial returns of 10% lure investors to pay at least £30,000 for a small room – and that price per square foot is often double that of a buy-to-let flat or terraced house nearby.
Some student pods are sold for £60,000 or more.
Developers quote yields and projections about student housing published by property consultants like Knight Frank, CBRE and Jones LaSalle.
Another student housing developer, Middle England Developments is pleading with investors for a 12-week rent break, blaming soaring tuition fees and fewer foreign students for vacancies.
The firm, run by director Nigel Russell, together with another company called Penlake, is under investigation for planning and housing act issues by Liverpool City Council that has sparked concerns for investors.
Latest from the blog
- Student House For Sale in Leeds
- Where To Find Good Student Properties For Sale in Birmingham
- Middlesbrough Student Market Ripe for Investment as Housing Shortage Continues
- Why Students are Flocking to Historic Chester
- Liverpool Student Accommodation
- Student Landlords to Step Forward in Tax Amnesty
- Students Homeless as Universities run out of Beds
Student Property Report
Knight Frank's Property Report 2014: an insight into the value of Student Property.