The student accommodation market in Portsmouth has seen tremendous growth over the last 3 years, in line with the growing trend across the country, of large purpose-built student apartments. The student accommodation sector itself has become a real powerhouse within the industry becoming the fastest growing and one of the highest performing asset classes.
The sector in Portsmouth has evolved from the days of poorly managed, poorly located, poor quality and low-priced HMO shared houses to an innovative solution of self-contained studios, twodies and cluster flats with all life’s conveniences included such as bills, WIFI, gym access, furniture packages and cinema rooms, all located just minutes from University campuses. And the market is now starting to feel the impact of these new modern accommodation offerings.
Rental prices in inferior locations outside of the student quarters are starting to decline, and take up of available supply in these areas is also slowing as students move towards the more modern accommodation offerings. There will always be a place for the HMO shared house as long as the price point is attractive enough and the real net result is actually likely to be of a benefit to the housing supply in Portsmouth.
The drop in rental performance from HMO houses will lead to a decline in planning applications and a likely return to the more typical dwellings for families and professionals which will help ease housing supply pressures. The decline in rents will also open up the housing supply to a wider audience and just ease the pressures on cost of living. Landlords and investors that have not moved with the trend will obviously feel the negative effects of this change. However fortunately, Portsmouth benefits from some of the best rental yield returns in the South of England which will help to protect any downside, and the decline in rental values in these areas will ease the pressure on property price increases making the market more accessible to a wider audience.
With the additional disruptions surrounding the marketing place in terms of Brexit uncertainty, tenancy/landlord rule changes, stamp duty increases and changes in tax relief – it’s a challenging time being an investor landlord. All these things together with the increase in local market supply creates a viable argument for the consideration of exiting from assets, especially assets that rely on the student market but which have declined in quality and/or are in less desirable locations.