Student housing investors look before leap to new markets

“It’s something I have advised, and it makes sense, although the prices in those more mature markets are higher and the barrier to entry is greater,” said Liem Vien, a broker with ROCK Advisors Inc. in Burlington. “It’s about protecting your investment and well established college and university communities tend to provide that security.”

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The advice is a bit of a wet blanket for property investors hot for rapidly growing college towns such as Oshawa, Ont. There, property values remain below the national average and a surplus of land surrounding its developing campuses is now being bought up, earmarked for the high-density low-cost housing attractive to university students.

Those same factors attracting investors could ultimately limit their return on investment, said Vien, pointing to increased competition among landlords and the lack or rent protection associated with it.

Further development of housing is also a potential hazard, as even more institutional investors step in to build and add to the inventory pool.

Oshawa and other manufacturing towns-turned-college ones may be hard pressed to pick up any slack students leave, said Vien.

Kitchener, Ont., already home to no less than three post-secondary institutions – as well a burgeoning economy – may be a better bet in the long run, argues Vien, pointing to an already mature student housing market with little room for new builds.

That acts as something of a barrier to entry at the same it protects property and rent values.

“It’s more costly to get into those kinds of markets and harder to find the opportunities,” he said, “but that will better protect the cap rates now and in the future.”

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