Developers to build new student homes

New home developer Bouygues has been awarded planning permission to build new student housing in Southampton.

The 15-storey City Gateway student accommodation block will provide 350 student beds in the Swathyling district of the city. Work will start on the development later this year.

Student homes are generally the most lucrative in this country as far buy-to-let returns are concerned, yielding a landlord an average of 6.45%, according to fresh research by specialist mortgage lender Paragon.

Nigel Terrington, Paragon Group Chief Executive, says: "Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income. On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models."

New student homes are big business as they are generally sought-after by property investors. Consequently, a range of housebuilders are expected to bid for the rights to build a multimillion pound campus for Manchester Metropolitan University in Hulme, which will include new homes for 6,000 students.

Meanwhile in Essex, new home builder Weston Homes says that it has received a high volume of enquiries for new build properties in its Hawkins Wharf in Colchester, because the development is located near Essex University.

A company spokesperson said: "Students are currently waiting for investors to purchase these properties at Hawkins Wharf."

Located on the banks of the River Colne, new homes at Hawkins Wharf start from £116,500 for a one bedroom apartment and £225,000 for three bedroom townhouse, subject to an achievable annual rental return of up to 10%, according to Weston Homes. Furthermore, the housebuilder is offering a rental guarantee for two years.

Dean Jackaman of Jackson & Co, who is working with Weston Homes on the rental side of things, commented: "We have an excellent arrangement with Essex University students and take them very seriously and even encourage their parents to buy rather than rent, as huge savings can be achieved over two or three years."

Bob Weston, Weston Homes chairman and chief executive, said: "The exceptional level of specification has proved particularly popular and with a huge demand from students and rent guaranteed for two years, the development appeals to investors."