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University challenge

University towns have traditionally been regarded as hot spots for buy to let and many intermediaries will be getting calls from parents on whether to buy a house to rent to students.

A survey by Halifax charts the rise in house prices in the areas of the top 20 universities. Manchester recorded the highest property price growth since 1999, with a rise of 114 per cent from 63,780 to 136,603 in 2005 for an average property, closely followed by Bath, where house prices rose 113 per cent in five years. The third best-performing location was York which saw a 109 per cent rise.

The average rise in prices across the top 20 performing universities over the past five years was 88 per cent, above Halifax’s estimate of the UK average of 83 per cent.

Northern cities and towns outperformed the South, with Newcastle seeing a rise of 125 per cent, Birmingham 108 per cent and Sheffield 107 per cent.

A new report from thinktank Future Foundation claims equity-rich parents keen to buy on behalf of their children will give areas such as Birmingham, Southend, Durham and Bradford a boost.

Halifax Estate Agents managing director Colin Kemp says: “Rising house prices across the UK have helped parents buying property for their children in university towns and cities to enjoy excellent returns. However, the decision to buy a property for a child at university should depend on the parent’s personal circumstances and property prices around the university in question.”

The fight for a place in a local school can also provide boosts to the market. Mortgage Intelligence managing director Sally Laker says there is a shift in Bournemouth as parents aim to get their children into a school in the area, even going as far as renting a property, so they can be in the right catchment area at application time. She says: “Buy to let becomes quite a business in Bournemouth, not just because of the university or the colleges but because of the schools. It is cut-throat.”

Other areas are becoming hotspots for different reasons. Liverpool has seen regeneration schemes over the past 10 years and becoming the European Capital of Culture for 2008 has been a major boost for prices. The Land Registry puts the average property price in Liverpool at 106,136, with detached homes selling for an average of 215,213. With a strong university contingent as well, the BTL market seems set to flourish here.

Fairway Mortgages senior consultant Carl Bowler says right-to-buy deals have probably tripled or quadrupled recently.

The 2012 Olympic Games is set to boost property prices in the capital. Barcelona, Athens and Sydney all saw a significant upgrading in their urban infrastructure from the Olympics and rejuvenation boosted property prices. Homeowners in Hackney and Stratford could reap similar benefits.

Cartel director of compliance John Rattigan says there are opportunities for intermediaries. He says: “Hackney is definitely a hot spot, with the 2012 Olympic Games. Middlesbrough is also going through a regeneration programme, with many of the terraced houses being replaced by two or three-bedroom detached properties.”

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi says Hackney as well as Bow and Stratford will see more interest and adds that London is seeing a resurgence after a flat period, particularly in Chelsea, Belgravia, Kensington and Notting Hill. There are signs that the 400,000 to 1m residential properties are seeing more interest.

He says: “Even first-time buyers are becoming interested, with the cut in the base rate allowing them to look at the 330,000 to 350,000 bracket. There is certainly a recovery of activity. With the current state of things, you can shave 10 per cent off the asking price and investors can even get 15 to 20 per cent off new builds.” A&L has seen its best month so far this year, reporting a 10 per cent rise in remortgaging which it expects to remain strong.

Laker says the higher end of the market has seen less of a dip but believes that three-bedroom semis are still playing catch-up as they entered a static phase in most areas.

Another hot spot is Northern Ireland, according to Yousefi. He says there has been a lot of consolidation in the intermediary market there, with bigger firms taking over smaller companies.

The peace dividend also means that the likes of Citibank and Abbey have opened up call centres in the area, bringing financial interest to the area.


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