CHOOSING a university used to be a relatively simple matter: pick a subject, visit a few institutions and opt for the one with the best course or the nicest architecture. Now, however, parents are increasingly seeing the choice of college in terms of long-term financial returns.
A report produced for The Times by Halifax Estate Agents has analysed house prices in the top-performing university towns and cities, enabling parents to assess returns on the property market alongside student-to-staff ratios. The report reveals that if a place at one of Britain’s top universities is on the cards, parents wanting to invest in property as well as their child’s education will need deep pockets: homes in one of the top 20 university towns cost almost £50,000 more than the regional average (compared with an average premium of £9,608 across all 109 university towns). Price rises in these areas were relatively weak (see the table above) — on average 77 per cent in the past five years and below the national figure of 83 per cent.
One example of lower than average house price growth is Oxford. Although its university received top marks academically, it had the lowest rise in house prices of the top 20 university towns in The Times Good University Guide 2007. House prices in Oxford rose by 40 per cent in five years to £251,160. Cambridge fared better with a 59 per cent rise in property prices over five years. However, a home there costs almost £60,000 more than in East Anglia as a whole.
Charles Lavell, of Hamptons’ Oxford branch, says that properties close to the university’s colleges are expensive: in north Oxford, a three or four-bedroom Victorian end-of-terrace house costs £650,000-£775,000. As a result Lavell says that investors are buying in less expensive areas such as east Oxford (where a similar property would cost £350,000-£550,000) and that increasing numbers of parents are opting for modern apartment blocks. He says:
“They like to look at a property in terms of its yields so that when their child has finished their course the property can stand its ground in the investment market.”
The trend to buy smart properties for student offspring is one that Ed Mead, of the estate agent Douglas & Gordon, has seen in Kensington and Chelsea. With an average property price of £604,881 it is the most expensive spot for a home. He says that wealthy overseas buyers are snapping up flats for their young in swanky developments with porters. “The parents like the idea of having a place in Kensington and Chelsea as well as the idea that the children can walk to college.”
If property investment is an important criteria in choosing a college, other London universities could also be a good choice, according to a separate report from Landlord Mortgages. Students hoping to attend top London universities such as LSE, UCL, or King’s College can sleep easy knowing that they will be helping their parents’ property gains — the report highlighted London as the top university town in which to profit. The mortgage broker calculated that parents could earn more than £17,000 on the value of their home over three years and save £1,485 in rent if their children lived in the property.
Those hoping to strike a balance between a good education and a good investment might consider putting Nottingham or Durham on their UCAS forms. Durham had the highest increase in house prices of the top 20 universities. Since 2001 prices rose by 122 per cent and now stand at £145,417. In the city centre terraced houses are predominantly occupied by students, says Paul Rogers, of the estate agent Reeds Rains. He says that this has made some areas unattractive for professionals.
Nottingham, ranked 14th in the Times league table, is the least expensive of the top 20 university towns in which to buy a property. House prices have almost doubled in the past five years and are also considerably lower than the regional average: £139,135 in Nottingham compared with just under £150,000 in the East Midlands. Sharon Walker, of the Nottingham estate agent Frank Innes, says that demand from students and their parents has pushed up house prices in a two-mile radius of both Nottingham and Nottingham Trent universities. “Many parents are buying properties for their children and retaining the property to let once their child has left. Many students also stay on after university and get jobs in the town, with the knock-on effect that they will move up the property ladder,” she says. Five-bedroom Victorian houses costing on average £300,000 are popular.
The Halifax report also tips investing close to five other top universities where values lag behind the regional averages as “potentially offering good value for money”. The highest-ranked university where homes cost less than the regional average is Bristol: here properties cost about £6,000 less than the average home in the South West. Leigh Hunt, of the estate agent Chappell and Matthews, says: “The Bristol housing market is somewhat dependent on students. Clifton is regarded as an expensive area but many of the more affluent students chose to live here because the houses often have around five bedrooms.”
Other strong contenders for investors are university towns and cities in the North where property prices are below the regional average. These dominate the league table of highest house price rises. For example, Manchester — ranked 26th in the top universities table and a member of the Russell Group (an association of 19 major research-intensive universities) — is in the top ten university towns for price rises. But despite rising by 123 per cent to £
141,709 in five years, a home there is £7,298 less than the average cost of a property in the North West. Newcastle, which is also in the Russell Group, also had some of the biggest price increases in the past five years: an overall rise of 115 per cent brought the average cost of a home there to £154,581.
Some of the top-performing cities for house price rises were at odds with the desirability of a seat of learning, however. Despite coming 92nd out of 109 colleges in The Times Good University Guide, Sunderland tops the table for the highest house price growth in the past five years. Property prices here rose by 147 per cent to March 2006. Parents hoping to buy here would need to find on average £132,142.
Although it is unlikely that the choice of university will be based on house price rises alone, it may not be long before it becomes a real consideration to help to relieve the everincreasing problem of student debt.
