For the last 2 years, I have been telling people privately to leave the student HMO market. It has seen huge growth in this time with a hundreds of new investors climbing on board and creating large HMOs and commercial developers bringing in numerous high rises. Almost like printing money…

Councils have also pushed the agenda – with many across the country bringing in licensing at varying degrees. Added to the rise in property value, the investment started becoming unviable in the short/medium term.

Now the reset. It was bound to come…and my guess is that its on its way, over the next year. There are a few large risks at play here:

  1. The propensity for students to return to university
    • More important reasons to defer university placements may be to help support a family by taking on a job, working in the family business or deciding against university entirely,
    • Whatever the reason, the likelihood is that many students may decide to postpone a year.
  2. University courses being delayed or held online for at least the first semester (Cambridge, Manchester, Glasgow, Aberdeen and Edinburgh are the first – but watch this space for more to follow)
    • Those students who do decide to go to university now may have their first semester from home – entirely online – or have their course delayed. Some media report that as many as 1 in 5 may decide to defer if this happens. However, I don’t think Universities have much choice. Securing the overseas student fees is most important – a virtual course would allow a greater intake.
    • This means that fewer properties will be required – and where they are taken, lower demand may mean a drop in rent or more wider offerings such as gyms etc.
    • This would eat into profit margins and create a squeeze on many leveraged investors – particularly those who are in the rent to rent / guaranteed rental market.
  3. Lenders rates increasing and product list being reduced severely.
    • As covered in a previous blog – the lenders are reducing their offerings and being more stringent with their lending. This means that many trying to refinance their properties after substantial works may find their end values are not feasible anymore.
  4. Struggling councils looking for more ways to cash grab
    • One of the major benefits of student housing is that no council tax is due – I fully expect this to be withdrawn in the coming year as councils struggle to balance budgets. There will be a substantial increase in council tax as is, and an easy money spinner for councils is to charge owners of student HMOs – who they will already be receiving a licence fee from.

If you want help negotiating these risks – finding a strategy that suits you and can be implemented in time – then get in touch with me using our services.