Rents Soar as Chronic Shortage Forces Students into Local Hotel
- Aberdeen University forced to house 100 first year students in local hotel.
- Critical shortage of rooms has led to crisis, with less than 10% of students able to access purpose-built accommodation.
- The private sector are filling the gap, as councildraws up delayed action plan.
- Emerging Property’s Aberdeen student development 100% occupied from day one, with rents up to 54% higher than projections.
An unfortunate 100 first year students in Aberdeen have been forced to begin their studies in a local hotel, after the city’s student housing shortage reached critical levels. With a total of 66,000 students and just 6,254 student rooms in total, according to the Aberdeen City and Shire Housing Need and Demand Assessment (March 2011), crisis has been on the horizon for years.
Compounding the issue is the rocketing prices in the private rental market, which, according to lettings site, Citylets, saw average property rents surpass £1,000 per month in 2013 – an increase of 11.5 per cent from the previous year. This has been catalysed by the influx of workers to a city where, inspired by the energy sector (oil & gas especially), unemployment is less than half the national average.This is in addition to the limited development activity, which has seen an average of just 523 new housing completions annually since 2006.
In response, the city council is to launch a £3 million initiative to create 2,000 rooms within five affordable housing developments. Whether or not this will provide an adequate solution to the issue, however, is questionable – it is not only students who are suffering.
“There are problems with accommodation in Aberdeen in general, whether it’s private, the rented sector or student accommodation,” says Emily Beever, president of Aberdeen University’s Student Association (AUSA).”Aberdeen is the second most expensive place to live in the UK, so it’s obviously a major concern amongst students.”
The concern for the university is that, if students can’t find anywhere to live, then applying elsewhere will be their only option.With the council’s plans still very much at an early stage, it is the private sector that is currently working to fill the gaps, with developments designed specifically for students providing additional rooms.
For one such development, the heightened demand is proving lucrative for investors, with secured rents having leapt up more than 50% on projected levels. This is a huge increase and demonstrates just how undersupplied the Aberdeen housing market is.
“When we first began to research the city as a potential location for a student development, we were astounded by the supply gap,” says James Harrington, Business Development Manager at Emerging Property – a leading property investment consultancy, which has recently sold out a student development in Aberdeen. “We were able to secure a great city centre plot and build 30 high quality student rooms.”
These rooms were offered to investors with 10 per cent guaranteed net yields for 10 years – the best returns in UK student property – on the premise of achieving £130 in weekly rent. This is inclusive of professional property management and the presence of an adequate buffer to provide security.
In August, however, almost a month before the development’s scheduled completion, all rooms were taken by the University of Aberdeen itself, with rents of up to £200 per week – 54 per cent higher than initial estimates.
“We are always conservative with our rental projections, as security is a key aspect of the investments we offer,” explains Mr Harrington. “But to secure rents more than 50 per cent higher than our estimate highlights the critical situation of student housing in the city and puts our investors in an incredibly secure and lucrative position.”
With a second Scottish oil boom predicted by Professor John Howell, a leading offshore expert at Aberdeen University, it appears that the housing crisis may only get worse before it gets better.
To find out more about Emerging Property’s student investment opportunities, you can visit www.emergingproperty.co.uk or contact firstname.lastname@example.org