Buying a second property?
The Qandor round up of the last decade’s housing fads
For years, the property sector has seen a wealth of property investors enriching communities within our cities and towns. Long term investments that help to boost commercial success or community-centred housing to increase amenity have been just some of the tried and tested ways investors have added value to urban areas. However, it wasn’t until recently that investors entered into unchartered territory, responding to a gradual shift in the lifestyles and property requirements of millennials.
From micro-flats to student housing, the last decade has brought significant change within the property industry. If you’re looking to invest in a second property, it’s important to know what to look out for, so here, we’ll take a look at the opportunities for those buying a second property, and the benefits and challenges that come with sustaining and maintaining a lucrative investment.
With the rise in popularity of ‘smart’ living and multifunctional furniture, developers over the last decade have begun to identify new, efficient ways of living which mean that smaller, more compact spaces can be utilised just as effectively as larger apartments. From this, the concept of a micro-flats has come to fruition: well-located accommodation at a fraction of the cost that city makers would typically expect to pay for a standard size apartment.
Nowadays, developers are continuing to play around with the idea of micro-living. Yet, despite its popularity, it’s not short of controversy — with many claiming that living standards are becoming increasingly compromised as a result. But in response to these worries, Patrik Schumacher, the head of Zaha Hadid Architects, has argued that “millennials do not need living rooms and their housing prospects would be greatly improved if size regulations were overhauled”. In contrast, he claims that hotel room-sized studio flats are ideal for young professionals who lead busy lives, and that we need a capitalist reform to solve Britain’s housing crisis.
Schumaker goes even further, suggesting that the minimum size of 37 square metres for a flat prevents millennials from getting on to the property ladder to begin with — but already organisations have hit back. The housing charity Shelter, for instance, have argued that tiny homes don’t necessarily mean cheaper homes, and that compromising on space and quality “isn’t going to do anyone any favours.”
Despite the numerous investment opportunities that these micro and studio flats pose, with developers undeniably getting ‘more for their money’, in time the price of land will inevitably reflect this, and the negative press already gained concerning minimum standards will only feed the stigma attached to property developers and investors.
One housing fad that has continued to reap steady rewards for investors is student housing. Over the last decade, higher education has become more accessible for students, which in turn has led to a significant demand for affordable student ‘digs’ in the UK’s most attractive and reputable cities. According to a paper published by the House of Commons, in 2016/2017 there were 2.3 million students at UK higher level education institutions. Despite dips encountered in 2012 when university fees rose to £9,000, student numbers have increased to record new levels.
This rise is set to remain, even in the face of a possible harsh Brexit. According to property management software specialist Arthur Online, “EU students represent only 6% of all full-time students in the UK, and therefore even in case of a harsh Brexit, there would still be a stable demand from UK students and other internationals limiting the impact on student numbers.” For property investors, this solidifies the idea that student accommodation can be, and might well stay, a very profitable asset.
Location, location, location
Students aren’t just drawn to universities for their reputation or courses. Each year, Citybase Apartments offers a ranking of the top university cities in the UK, taking into account a number of different social and lifestyle factors. London regularly finds itself on top, with Nottingham and Newcastle following close behind. Location clearly matters for students, and this has an impact on where you should invest.
With this in mind, it’s needless to say that your investment and its location should always be thoroughly researched. This is partly so that in the event of oversupply, your property is already tailored to an audience of city commuters or the generation of millennials that prioritise hotly-desired locations over single-occupancy properties. If you thinking even further down the line to when you come to sell your asset, property values will naturally fluctuate with the market, so again it’s important to ensure that your investment is attractive as possible to future buyers.
What are the risks?
In spite of the strength and resilience of the sector, there are, as with any investment, risks associated with purchasing a second property. If you’re thinking about investing in student property, one risk to consider is whether the property will hold its value. Are we likely to see another hike in student fees, forcing many students to consider either part-time or remote courses? If we do, then this might negate the need for high levels of student housing, ultimately making this type of investment less valuable as it once was.
Another concern is payment. How can investors ensure rent agreements are fulfilled, and what can they do to effectively manage these? Nowadays, there are a number of different systems in place that can relieve the headache of managing payments. Modern technology like cloud-based platforms, for instance, can offer stakeholders an open and transparent system for peace of mind and prompt payments.
The bottom line
Ultimately, the purchase of a second property might be met with apprehension and may require a big leap of faith. Whether you’re looking at micro-flats or student property, there can be an overwhelming amount to consider and weigh up. However, the best way to gauge the feasibility of your second investment is to learn from others and share ideas with like minded individuals who, too, are looking to expand their property portfolio. At Qandor, we provide a friendly, driven environment for professionals to learn and share knowledge of the industry, and how to progress through it with integrity. If you’re interested, head over to our Advice page for more property insights.