In the dynamic realm of real estate investment, few sectors offer the blend of excitement and challenge found in student property ventures. In our latest piece, we navigate the intricate landscape of this burgeoning market, shining a spotlight on North Fox Property – a distinguished player renowned for their expertise within the realm of student accommodations.
As a trusted partner of the GIP platform, North Fox’s tailored strategies for identifying promising opportunities underscore the paramount importance of location in investment triumphs. Whether you’re a seasoned investor or new to the market, delve deeper into our insights through an exclusive Q&A session with Kevin Axon, director of North Fox Property, where we unravel the nuances of student property investments.
1. Can you provide an overview of North Fox’s involvement in student property investment and your role within the company?
At North Fox we specialise in the residential property investment sector, student property making up a small but significant part of what we do. We feel, and this is certainly backed up by the data, that there is a major undersupply of student beds. In fact figures from StuRents show that the shortfall is expected to exceed 600,000 beds by 2026. This presents an unrivalled opportunity for investors to both contribute to the solution and earn very high levels of hands-free income while doing it.
As director of North Fox my role is to ensure we have a pipeline of suitable student accommodation to offer to our investors. Alongside the rest of the North Fox management team we also have to feel comfortable that the developers we work with have experience and expertise in the sector necessary to deliver best in class projects.
2. What makes student property investment an attractive opportunity for investors?
High yields, hands off investments, long term assured rental contracts, a sector with a huge under supply of accommodation, no stamp duty on PBSA. The sector is extremely resilient as the data shows us that student numbers are increasing across the board. Recessions and economic downturns don’t dampen applications. We also have falling starts on new student developments following the pandemic and the rising costs of construction. Finally, you have many older HMO-style properties facing rafts of new regulations pushing many of those operators out of the market.
3. How does North Fox identify promising student property investment opportunities?
We look at the history of the developer in question, do they have a track record of delivery, do they have a contract with an experienced student management operator, what is the location like for students, competition in the area, proposed facilities, completion date, payment plan, number of units already sold, price of course and the terms of the rental contracts on offer.
The financial times reported recently that there is a looming increase of 150,000 students going into higher education by 2030. As demand is increasing the number of PBSA (purpose-built student accommodation) beds delivered is falling rapidly (down 66.7% from 2019 to 2023.)
4. Can you elaborate on the types of student property investments that North Fox specialises in?
We specialise in PBSA, these are developments that are built solely for students and have all of the security and facilities student and parents want when looking at where they are going to be staying when moving to a new Town or City often far from home for the first time. This is where the demand is and how the market is moving away from old terraced houses towards safe secure modern accommodation with facilities on site.
5. How does North Fox approach due diligence and risk assessment for student property investments?
This is one of the hardest parts of what we do as ultimately we are agents and our role is to sell for the developer. We aren’t financial advisors and are not independent. We do however have the ability to pick and choose what we sell and how we work with. We have a huge range of factors that we assess when deciding what student projects to take on but ultimately this is a small sector with a handful of operators so the choice isn’t vast. We are fortunate to currently sell for Abode and they have a very good track record in the PBSA sector so we feel comfortable.
6. Can you discuss the demand dynamics in the student property market and how they impact investment decisions?
The UK is seeing a population spike in those young adults reaching 18 and applying for higher education. The significant fees associated haven’t had a big impact on those numbers. Some Universities that are more reliant on non UK based students may have seen their markets change slightly after Brexit but this has been offset by increases in domestic applications. We would be wary anyway if a student development was based next to a niche educational establishment that catered mainly to non UK students.
7. What role does location play in determining the success of student property investments?
The obvious thing here is the local University, what are the student numbers like, what are the existing provisions, do other PBSA projects nearby sell out and at what rates, and what construction is planned in the area. There is a huge range of things we use to build an investment case and we have access to marketing leading software to analyse the data. I feel PBSA works particularly well as many parents feel much more comfortable knowing their son or daughter is in a secure safe and managed block. They will have someone they can call with any maintenance issues and will be able to socialise with many different people in the lounge or maybe even the gym.
8. Can you share insights into the financial performance and potential returns of student property investments?
Student investments lend themselves to high levels of income rather than high levels of capital appreciation. Many of the UK pension funds invest heavily into PBSA so if you have a pension you possibly already have some investment in the PBSA sector. Blackrock the world’s largest private investment fund bought over 2 billion pounds worth of PBSA a few years back showing what they feel about this investment opportunity. Returns can be anything from 7% – 10% NET totally hands off and with long-term contracts of between 2 and 5 years initially.
9. How does North Fox navigate the regulatory landscape and compliance requirements associated with student property investments?
We only sell PBSA in the UK and all of the developments we deal with are new and have been through student planning and meet modern building regulations. The operators of the projects are also experienced often having thousands of PBSA rooms under management. This is what we want as an experienced operator will ensure you are compliant as the owner and that your investment is safe and well looked after.
10. Finally, could you share success stories or notable achievements from North Fox’s portfolio of student property investments?
Over the 20 years I have worked in the property investment industry I have worked on a great many student projects. Over that time I have had hundreds of clients complete on PBSA units. Now there are always issues that arise with property anyone who tells you anything else is lying to you, as an investor myself I have had my fair share.
We are genuinely experienced enough and long enough in the tooth to be there for you if and when this happens to ensure you can be secure and safe in the knowledge that come rain or shine you will be looked after by our team. Almost every project I have worked on has provided rental returns at or above the levels projected at the outset and we have seen projects completed in many different locations from major cities such as Birmingham, Sheffield and Manchester to smaller but very lucrative student towns such as Huddersfield and Loughborough.
Photo by Liza Summer
