Morality tales in bricks and mortar
Failure is more instructive than success. That’s a lesson with which every investor – indeed, every human being – should be wearily familiar, but it often goes unobserved because success is much easier to talk about. So this week I’m focusing on a property investment that looks singularly bad: so-called ‘student pods’.
‘Pod’ is a marketing buzzword for an individual room in a student accommodation block. These are widely advertised to private investors on the basis of ‘guaranteed’ or ‘assured’ net yields of up to 10 per cent. Such figures sound exceptionally attractive – readers hardly need reminding how rare double-digit yields are in today’s low interest-rate world. But they come with at least four substantial risks, which in the unregulated world of buy-to-let investments are easy for developers and brokers to gloss over.
First, lettings risk. We have long vaunted the merits of the student-lettings market, but aggressive development may be leading to oversupply in some areas. Unite, the listed student accommodation player, this week warned that competition for projects was pushing up land and build costs in London. If embattled pod developer Middle England Developments is to be believed, the Liverpool market is also saturated …