It’s been a busy week for me and I hope you are all enjoying the Easter break. At the request of one of my readers, a lovely lady who rents several student houses of multiple occupation (HMOs) in Gillingham, in this blog post I will be writing about the student property market in Medway.
There are two locations that are well placed for student HMOs in Medway: the Universities at Medway, and the University of the Creative Arts Rochester.
This post will focus on the first location at the Universities at Medway campus over near Dockside in Gillingham, which has approximately 9,000 students enrolled at either Canterbury Christ Church University (over 1,800), Greenwich University (4,313) and the University of Kent (around 3,000).
Greenwich University has 350 single rooms at Medway Campus that are en-suite and with shared kitchens, with rents between £126.91 and £138.04 per week. For University of Kent and Canterbury Christ Church students, Liberty Quays offers 1,106 rooms which range from en-suite bedrooms at £117.00 per week to Premium Studios at £143.50 per week.
This is Liberty Quays provided by Liberty Living
The total number of rooms provided by the universities accounts for 1,456 students, and assuming 25% of the 9,000 population are living at home as found in this 2010 study on the Medway student housing market, then this leaves approximately 5,294 students needing accommodation elsewhere.
Specialist student accommodation providers have filled the gap, since emerging nationally in the ‘90s, weighing in to a lucrative sector. In Medway, property development has taken place at Compass House, Medway Road, Gillingham. This was previously Shalder house but was bought in 2012 by investors who transformed it.
Before: Shalder House
After: Compass House
It is now a block of modern en suite rooms and apartments, commanding rents of between £85 and £135 per week. Other examples of similar commercial student accommodation in Medway include: Saxton Court ME7 5BB, Maritime House ME7 1TS and Commissioners Court ME4 4HQ.
But supplying most of the market is the private rented sector; Medway landlords have satisfied the demand by creating, by my estimates, around a thousand student HMOs across Gillingham (considering there are 22,000 homes in the ME7 postcode, this is a high figure!). I was discussing this very subject yesterday with a contact who has student HMOs in Gillingham and he told me that increased supply has decreased rents from a high of £120 per week five years ago to around £85 a week now.
So I gave a property investor friend of mine a call to confirm whether this was the case: he has only been in the student market for three years and with top-of-the line accommodation is able to charge £100 per week. This rental price is lower than you could expect at a HMO for working professionals. Further, he has not been able to raise rents over the past three years. So maybe there is an oversupply issue here.
So why would you consider investing in a student HMO in Medway? Well, student HMOs offer the possibility (if done right) of having no void periods, no council tax to pay and straightforward rental collections with the added benefit of parental guarantors. A five-bed HMO in Gillingham would bring in £500 per week or £26,000 a year. The average price paid for a terraced house in Gillingham over the past 12 months was £176,283; this gives a gross yield of 14%.
However, be aware that after paying bills, mortgage repayments and general maintenance your yield will be reduced. Also, plan for the mortgage interest tax changes in 2021 and imagine your gross turnover is taxed at the basic rate. This £26,000 figure could be reduced to as little as £14,656 – or if you are a higher rate tax payer it would work out at £9,456. So in this example, in order to make sure your net yields aren’t below 6% you should be buying a property at less than £157,600. You should consult with specialist property accountants and independent financial advisors, to ensure the numbers on your investments stack up.
What about capital growth? Average prices for terraced properties in Gillingham have risen 33.17% in the past five years, which is higher than the Medway average increase of 31.27%. I believe Gillingham is an up-and-coming area and so will continue to benefit from increased rental demand whether or not the student market in Medway loses buoyancy or not. Pick a property in good proximity to the Universities at Medway campus as well as Gillingham train station, and you will be in a good stead for a decent return on investment.
So, investing in the Medway student property market is not a failsafe. As always, you must pick properties in a desirable location and refurbish them to a high standard to guarantee the best rents. Alongside those important considerations, remember to have proper systems in place to make sure your properties get the right exposure in the right places and at the right times. If you want any advice or guidance on this matter, please don’t hesitate to call me. My number is 07944 726676, or email me at firstname.lastname@example.org
Thanks for reading, the next part will be about student lets in Rochester/Chatham, if you want to have that post delivered direct to your inbox subscribe to the Medway Property News blog.
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