Baysailor wrote:There's a pending bust on the way with student accommodation. With all these builds and conversions, the market is going to become over saturated then crash - sounding familiar?! Look at the now nameless Student Castle by the firestation on Adam Street. Looks like the original developers have already bailed out. I love capitalism.......
Of course there is a possibility of a crash - as in any investment market. But such crashes are more likely when there is a speculative bubble, with valuations (an in real estate, construction) being driven by the expectation of further valuation gain and yield compression. But at the moment at least, construction doesn't seem driven by such valuation speculation. Capital values aren't decoupled from rental values - yields are still really quite good (better than general buy-to-let). Healthy yields - in other words, healthy rents- suggests that there is still demand out there, despite the big increases in supply we've seen already.
Now the market has taken the view that strong demand will remain, driven by high (and still increasing) university and higher education enrolment; overseas students; and a shift from private rented property to such specialist schemes. Each of those is something that could prove weaker than expected/hoped - and with big increases in supply, lower demand could put downward pressure on rents. Lower rents and growing vacancies would put a halt on new schemes, and could cause firms operating such schemes to go under - forcing sales, and further downward pressure on capital values.
The very large number of schemes to come on stream in Cardiff in the next few years means the city probably has a higher risk than many of such a thing happening. But its not a given.
And while Student Castle has been sold, that does not mean the original developer "bailed". They were sold as part of a package of properties for a very good price (the average price per unit for the portfolio was £153,000 - although that includes a property in London). And Student Castle are still building in cities across the country.