Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Property

Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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Banks

BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Property

Student pod return pledges under fire


Posted on May 17, 2013

Student pods – the latest buy-to-let vogue, where investors buy a single room in a development – have been attacked for failing to deliver promised double-digit returns.

Attracted by guaranteed returns of up to 10 per cent and prices as low as £30,000 – substantially less than an equivalent buy-to-let property – investors have snapped up pods across the UK.

    But because the properties are small, typically 12-13 square metres, the bite-sized asking prices belie high underlying property values. A £59,995 pod investment on the market in Canterbury, for example, costs more than twice the average for the city on a per square foot basis, according to Hometrack, a housing analytics company.

    Student-accommodation blocks have performed strongly,
    with annual returns of 9 per cent last year, according to estate agent Knight Frank. Rents have been buoyed by the growth of students from Asia, who typically prefer purpose-built housing.

    The strong market has attracted sophisticated investors, including private equity funds and overseas institutions. According to Jones Lang LaSalle, the property group, transaction in the UK student accommodation market was close to £1.9bn last year, more than double the value in 2011.

    But there are fears that some developers are using the buoyant market to sell inappropriate products to private investors.

    Kavita Bachada, an employment lawyer, bought a pod in Liverpool for £42,000 in 2011, tempted by a 10 per cent yield guaranteed for 12 months. “There was nothing out there . . . that offered anything like these returns,” she said.

    While the income flowed as expected for 18 months, it has since dried up. Middle England Developments, the developer, has now asked pod investors for a three-month “payment holiday”. It blamed a surge in vacancies caused by tuition fees, a clampdown on foreign students and a wave of development in the city.

    One problem is that the eye-catching guaranteed yields are typically subsidised by the developer, so income from rents, and property resale value, may fall when the guarantee runs out.

    Another developer, FreshStart Living, last month agreed a settlement to hand over a total of £131,000 in unpaid rent to 70 investors. It has since stopped selling pods to individual investors.

    “The guarantees are rarely sustainable,” said Charlie Cunningham, its chief executive. “Investors are often left with a useless property from which they will not only struggle to generate a reasonable income but they will also struggle to resell.”

    Mr Cunningham called for tighter regulation of the market, noting “people investing in property are not that sophisticated”.