I heard lots of people telling me NOT to invest in students accomocations as it has low capital growth, niche market and very hard to sell back into the market.
However, if that's the truth, then why are there more and more students accomodations buing built, especially around universities in Melbourne and its suburbs area?
Does anyone has any insights on this area?
Thanks heaps!
Maria,
They are being built for several reasons:
1) As a developer, selling the student accommodation to a hapless ‘investor’ yields the greatest return. Student apartments are typically about 23 sqm, and they can sell to some idiot for $10,000 a sqm. Since they are small, the developer can fit heaps of them in one development – hence maximising the use of the site.
2) People still buy them!!! People get sucked into the ‘rental guarantee’ that they fail to see the pitfalls of it. But I think less people are getting sucked in.
3) It is easier to get approval for student accommodation because there is a much more relaxed car-parking requirements. If you were to build normal one bedroom apartments you would need to provide 1 car park per bedroom – which adds lots of costs to the developer.
Those are the main reasons – as long as you don’t buy it, just let it be someone else’s problem
If you buy a 2 bedroom apartment it will appeal to investors and owner occupiers student studios will only ever sell to investors therefore no real resale market. Student Accommodation us a poor investment. If you are loosing money and there is no capital growth what is the point in buying it. Remember everything comes down to supply and demand
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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I looked into this a while back too. I need to borrow to invest and I soon found out that banks are usually not willing to lend you money if it’s a student accommodation…makes perfect sense they’d be losing out from all that depreciation.
Generally speaking purpose built student accommodation is cashflow positive and people can dive into these types of property for cashflow alone. Trouble is a number of the 'other' reasons against student accommodation, such as those mentioned here, do not become evident until it is too late.
Clearly research is/was needed to avoid these pitfalls..
Because people are stupid. They'll spend more time deciding which clothes washing liquid is the best buy this week than they will researching a property purchase that will cost them a couple of hundred thousand dollars. They see a low-cost unit and think it is a bargain, but don't realise there are other factors.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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