Unite downgrades value of its 40,000 student homes

Unite has become the first developer to downgrade the value of its property portfolio because of the covid-19 pandemic.

The student accommodation provider said the value of its two portfolios of student housing, made up of nearly 40,000 bedrooms, fell by 2.2% and 1.5% in the first quarter of the year due to the impact of the coronavirus.

The downgrade, the result of its decision to waive rents for students who return home for the rest of the academic year, has wiped about £80m off the value of its holdings.

The downgrade is thought to be the first in the residential property sector attributed to the pandemic, and Unite said it came as valuers reported “material valuation uncertainty” in the light of recent RICS guidance.

>> Housebuilding to fall ‘this year and next’

>> House price growth stalled in March

The firm also said there was a risk that lettings for the next academic year will be reduced if overseas students choose not to – or are unable to – travel to the UK to take up courses. However, it said reservations so far were in line with the figure last year.

At the end of March the firm said it was partially deferring construction of its 3,500-bed pipeline of schemes, saving £72m, though it was continuing to complete existing schemes where possible.

Joe Lister, chief financial officer at Unite, said its decision to forgo rent for students who choose to return home had impacted valuations for the period. “However, we are confident that our actions will ensure that we emerge from this uniquely challenging period with our reputation with students and Universities, not only protected but enhanced.”

Alastiar Stewart, research analyst at Progressive Research, said: “While many property companies have indicated the likelihood of impending downwards valuations, this appears to be the first formal down-valuation in the wider property sector. However, it could be temporary and based purely on the duration of lost rents rather than a longer-term change”.