Don’t get suckered by student accommodation investments

There are so many irritating things about the UK property market that it is hard to know where to start with the complaining. But at the moment, the thing that is bothering me most is this idea that we have somehow escaped the kind of property crashes that other bubble markets have had.

We haven’t. House prices across the UK are still down about 20% in inflation-adjusted terms, and there has been a proper crash in the north and in Northern Ireland. But the government flatly refuses to allow house prices to fall to market clearing levels, so a huge number of people still believe that property is, and always will be, the safest investment there is.

If I had a tenner for every reader who asked me to write more often about how to make money out of property, I would no longer have to worry about the price of property. If you see what I mean.

So, to humour you all, I do keep an eye on various parts of the property market just in case, and I do listen to what the endless parade of property bulls have to say about the supposedly easy money that is there for the taking.

At the moment I am hearing a lot about the student property market. It’s a good story. The number of students in the UK is high and rising – up from 1.8 million in the 1990s to more like 2.3 million now.

There was some worry that the high level of fees would put UK students off, but so far they don’t seem to have noticed the change in the risk-reward relationship.

The UK is also a magnet for foreign students, partly due to its reputation for offering high standards and partly to the weak pound – something that makes an English education paid for in an Asian currency look pretty good value. At some of the UK’s top universities, up to 30% of students now come from abroad.

And all those well-heeled foreign folk need somewhere to live. Local authorities and universities would all prefer that they lived in purpose-built student accommodation (or PBSA as the industry likes to say), so that they don’t push up rents elsewhere.

The fact that 20% of the houses in multiple occupation in Brighton are lived in by students is one reason that rents in the city are rising at 7-8% year.

So it appears to make sense to invest in PBSA in top university towns, the ones the students will keep flocking to. You get a stake in the property market, a good income – students appear to have little sense of what is the right price for anything – and the chance of a capital gain too. And you get all that without the bother of having to manage a buy-to-let. So, why wouldn’t you?

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Brazilian state of Piaui welcomes the EcoHouse Group Expansion

Map locator of Brazil’s Piauí state (Photo credit: Wikipedia)

As EcoHouse Group announce more phases of their Bosque development  the people of Brazil wonder which city or even state will benefit from these future Minha Casa Minha Vida Developments? It’s a little known fact that EcoHouse Group don’t just build social housing, even though this is what they are most famous for, EcoHouse also build premium homes and office buildings and has in previous press releases stated that they do have plans to expand to other areas of the county, whether this means social housing or premium homes we will just have to wait and see. One state that is excited about this news is the North Eastern state of Piaui who say they would welcome new infrastructure, whether it’s social housing or premium homes and offices.

Here is a little more about the state of Piaui. One of the most interesting states in the northeast of Brazil is Piaui (pronounced ‘Pee-ow-ee’). It’s comparatively small in land area compared to many of the others and has a short coastline of only about 65Km. The rest of the state broadens out and stretches roughly southwest from the Atlantic (a bit like a bottle broadening away from its neck).

Another unusual feature is that, unlike all the other seaboard states of Brazil, colonial settlement originally started inland and gradually expanded towards the shore, instead of away from it.

Piaui has a total land area of around 97, 000 sq miles (a quarter of a million sq Km). This makes it almost exactly the same area as the United Kingdom but with far fewer people of course; only 3.2 million as opposed to the UK’s 63 million!

The state capital is Teresina (800,000 people) which is situated about 360 Km from the coast. Unusually, it’s the only state capital in the north east not actually on the coastline.

The economy of the state is varied. By 1900 the main industry had become the rearing of agricultural livestock, principally cattle and this has always been important from that day to this.  Actual crops in the area have also included timber, cotton, sugar and rubber and their many associated products. In more recent times hides and skins have become more important.

The state capital, Teresina was the first Brazilian city to be deliberately planned rather than just left to grow organically. Obviously though, a certain amount of unplanned expansion has taken place since the launch of the settlement.

The original design of the city was based on that of a chessboard and it was built from 1852 onwards after having been set out by architects. The nickname of the place is ‘The Green City’, mainly because of the large number of mango trees found throughout the whole area.

In terms of geography, practically the whole state lies inside the basin of the Parnaiba river ( and its tributaries) and in fact the main river does form the western frontier of the state. The river links Teresina with the Atlantic port of Parnaiba and also the other important city of Floriano. The land gradually slopes upwards through the state towards the south and east, through a series of uplands and plateaux.

Of the people of the state about sixty percent are mixed race.  Just under a quarter are Caucasian and the rest black or Amerindian, so to that extent the state is as cosmopolitan as the rest of the nation.

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EcoHouse Group offers secure investment to investors by holding funds in an escrow facility

EcoHouse Group offers secure investment to investors by holding funds in an ‘escrow’ facility, controlled by an independent lawyer.

A brochure for the investment, seen by an independent Financial Adviser, states that EcoHouse Group’s first social housing development, Arco Iris, had seen every unit pre-sold before completion and investors’ funds being “returned within 12 months”.

EcoHouse Group also has another scheme in the pipeline, the Bosque development, with two phases already pre-sold and further phases planned throughout Brazil.

The independent advisor stated that “The problem is that politics in these regions are very unstable and there is always a degree of uncertainty about what would happen if developments stall. Advisers must enter this area with the best realisation of all the possible outcomes, good and bad.”

The escrow facility protects the investor’s money from any problems that may arise…

Jason Purvor, international commercial director at EcoHouse Group, said: “This is a real estate transaction where clients buy an option to own a full constructed unit and capitalise on a government-backed social housing programme. The escrow facility is overseen by a third-party lawyer, who is regulated under the Solicitors Regulatory Authority.

“Our clients tend to be general real estate investors, who already have an alternative investment portfolio.”

Mr Purvor said investors had received their capital plus 20 per cent on the Arco Iris scheme, but the subsequent return on the Bosque development had been lowered to 15 per cent as a “commercial decision”.

The company now had sufficient capital to be looking at the next social housing project in the region, he added.

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Student Accommodation Investment

English: New Student Accommodation – near Eldon Terrace (Photo credit: Wikipedia)

With the UK’s top universities more in demand than ever, there are now excellent opportunities for investment in student accommodation. But where should you buy? and how do you avoid the scams?

The high demand for property around universities its good news for those who own properties in these areas. Higher education is becoming a marketplace, with many universities competing for applicants. Successful student towns are becoming hubs, where the soaring demand for housing means high rental yields as well as capital appreciation.

We see a number of investment companies offering student accommodation as a great opportunity, this may be true, but like any property investment, if the end buyer doesnt exist then your don’t make your return.

I would say not to be taken in by glossy brochures and amazing artist impressions of bustling  student developments complete with games rooms, lounges and canteens. These are just pipe-dreams and 9 times out of 10 building work never begins and they do get completed are just too expensive for students to lie empty.

What you do want to be on the lookout for are investment opportunities in actual bricks and mortar where the building up, and is either a new build or a renovation of an old building. The investment lies in the renovation of each individual room or floor, where initially there is just a shell and your funds are used to complete the unit of floor to a high standard ready for lease.

Once leased you get a share on the rental income.

Brazilian State of Bahia could benefit from EcoHouse Group and Minha Casa Minah Vida

Português do Brasil: Imagem aérea do Farol da Barra, em Salvador, Bahia, Brasil. (Photo credit: Wikipedia)

As the Minha Casa Minha programme enters its fourth year it has become apparent that the programme will get extend at least until 2016, President Dilma has more or less confirmed this during recent speeches. This news means that more areas will reap the benefits of the programme. As each area awaits news one of the largest Minha Casa Minha Vida developers in Brazil, EcoHouse Group is tight lipped regarding the locations of any future projects. Here’s a little more info on the state of Bahia

Bahia is not one of the very largest states in Brazil but it’s certainly pretty big.  The exact size is something over half a million square Kilometres which makes it about twice the area of the United Kingdom or about the same as France. The population of fourteen million however is much less than either (and is only about double the size of London). Of these, about 2.5 million live in the Salvador area of the State capital. Other important cities in the State are Feira de Santana (600,000 people), Vitoria da Conquista (300,000) and Camaçari ( 250,000)

The state is on the Atlantic coast of Brazil. As mentioned above, its capital is the city of Salvador, also on the coast, where the Atlantic meets the Bay of All Saints (in Portuguese; ‘Bahia de Todos os Santos’) which of course is where the name of the whole state originates.  By the way, the site of the city was first glimpsed by exploring sailors from Europe in the year 1501. The state is geographically divided into two main regions by the north-south mountain range known as Chapada Diamantina. Nowadays the eastern coastal areas of the state are much more developed than the interior. There are several reasons for this. For a start, the natural vegetation of much of the Atlantic seaboard is coastal forest, one of the largest remaining such parts of Brazil. The land is comparatively very fertile.

Consequently in cleared areas the main crops of sugar and tobacco have always done well in the plentiful rainfall although these products are rather less important than they once were. These days soybean growing is a really large part of cultivation.. Similarly, Bahia is now (and has been for some time) the country’s largest producer and exporter of cacao, often known as cocoa and of course the basic ingredient of chocolate. But agriculture these days only accounts for about ten per cent of Bahia State’s GDP. Roughly speaking the industrial component comprises around 50% and the service sector 40%.

Industries are diverse and tend to focus on petrochemical and metallurgical products. An increasing part of this is the automotive industry. Other developing concerns in the economic mix are textiles, clothing and footwear as well as cosmetics and food processing. In the new 21st century Bahia is generally regarded as doing better economically than many other parts of Brazil. As a result of this, many administrators believe that inward immigration from other parts of Brazil will soon increase drastically.

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