A growing number of parents are buying up property to provide somewhere to live for their children and save them from fast rising rents.
Parents – many of whom, will have benefited from the surge in UK property prices during the 1990s and 2000s – are spending their cash on property for their children to live in while they study.
Students are coming under increasing financial pressure from higher rents and higher tuition fees to the point where parents are having to step in to ensure that some money can be saved on accommodation.
According to insurer Direct Line, 280,000 Parents have chosen to help their children onto the property ladder while they are at University to give them a better start in life. One in six of those parents think that buying property for their offspring will reduce the cost burden of University.
The number of students currently living in accommodation owned either by themselves or family and friends currently stands at 26% which is a considerable leap on what it has been in the past.
The stereotypical image of students living in slums is becoming a thing of the past for many who become property owners early on in life with help from parents.
While this might seem a cosy arrangement, not all parents have only their children’s needs in mind when they buy them a property. A Quarter of those who have bought property cite financial motivations such as gaining a regular income as the main reason they invest in property. A further 17% hope for capital returns.
The results of Direct Line’s survey comes after the Telegraph recently revealed that students are paying up to 36% more rent in the East Midlands than people living in equivalent properties in the same town.
Jazz Gakhal, Director of Direct Line for Business said: “It’s great to see that parents are seeing opportunities to help their children get a first step on to the property ladder and create additional income through buying a property for their university bound children.
There are pitfalls, however, when parents allow students to live in property they effectively own.
“The ownership arrangement of the property needs to be made clear from the outset. Parents should remember that if their child is letting out rooms to friends, it is the parent that will become the landlord.” Added Jazz.
“Parents who believe they may be in this situation should first check with their mortgage provider to see if this is allowed. They should then educate themselves on the regulations and liabilities surrounding student lettings.
Parents should also consider landlord insurance, particularly because they will have a duty of care not only to their child but also to their child’s friends. Home insurance is not tailored to your needs in the same way as landlord insurance when renting out a property. Home insurance therefore may not provide you with the appropriate cover for injury to tenants, damage to other properties or cover for loss of rent resulting from fires, storms and floods.”
Posted on: February 20, 2015