17 May 2011

Student lets: how will rising tuition fees affect demand?

Thousands of buy to let landlords could find themselves among unexpected victims of rising tuition fees as more students decide to stay at home, causing a sharp drop in demand for flats in university towns.

That is the main conclusion of new research by Britain’s biggest friendly society, LV=, formerly known as Liverpool Victoria, which – if proved correct – would represent a major change of fortune for one of the most profitable forms of investment in recent years. The analysis suggests that some areas which are currently popular for student digs could turn into “ghost towns”.

A survey of more than 1,000 students found that just over half – or 52pc – said they would choose a local university to make ends meet after annual tuition fees rise to £9,000. Official figures suggest that at present only a fifth – or 21pc – of full time students currently live at home.

John O’Roarke, managing director of LV= home insurance, said: “Newcastle upon Tyne, Lincoln and Sheffield will see the greatest decline in student populations.

“Because these areas rely heavily on university populations to boost their local economies, they could become ghost towns as non-local students abandon them for cheaper study closer to home. The areas worst hit will be those with large student populations such as Jesmond and Moorside in Newcastle; Broomhill and Sharrow in Sheffield; and Boultham and Carholme in Lincoln.

“Other cities which will feel the impact of the student exodus include Swansea, Portsmouth, Stoke-on-Trent and Nottingham, with university student populations forecasted to decline by 40pc in these areas.”

You might wonder why LV= should care. The explanation is that the household insurer fears that after the student exodus begins when fees go up next year, the result will be an increase in criminal damage when many properties fall vacant or derelict.

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