Popular university towns tend to offer a wide selection of amenities, strong transport links and plenty of job opportunities, while for investors they can also generate healthy yields.
Whether or not landlords are seeking to invest in student accommodation, it can be useful to look at how rental yields may be influenced by an area’s proximity to a university – particularly one that’s part of the well-respected and world-class Russell Group, of which there are 24 UK-wide.
For a traditional buy-to-let landlord who might not be keen on letting their place to students, one of the advantages of looking at one of the UK’s popular university towns is the additional tenant pool they may attract, with many graduates and young professionals opting to live in these areas.
This high demand can push up rental yields, and new research from Paragon Bank has discovered that 13 of the Russell Group’s 24 universities appear in the top 15 highest-yielding university towns and cities.
The best university towns for investors
The study looks not only at how student accommodation specifically fares, but how all privately rented homes in a particular postcode perform in terms of rental yields.
According to Paragon, Stoke on Trent (to the north of the West Midlands) came out top, where landlords achieve average yields of 9.43%. This was based on data looking at rental offers over the past two academic years, with landlords bringing in an average annual rental income of £13,860.
The town serves two major universities – Stafford and Keele – boosting demand alongside being a bustling and business-heavy location with plenty of job opportunities for tenants.
Liverpool, which often features heavily on reports looking at areas with the best rental yields, came out second with 8.93% average rental returns for landlords. The average property valuation in Liverpool from Paragon’s data was £295,722, with landlords making an annual rental income of £26,409 on average.
Edinburgh came next on the list of top-yielding university towns (8.23%), followed by York (8.12%), Coventry (8.08%), Cardiff (7.94%), Nottingham (7.88%), and Leeds (7.87%).
Deciding on your next investment
Considering both potential rental yield and scope for future capital appreciation tends to help investors hone in on an optimum location, although other factors will come into play too – this could involve proximity to the landlord’s home, affordability, and target tenant type, whether that be student homes in university towns or otherwise.
Concentrating on “up-and-coming” areas is another popular strategy for property investors, particularly those looking for a longer-term investment. Investors can research areas that are set for major regeneration or redevelopment, particularly where major transport improvements are on the cards.
Increasingly, property investors are interested in future-proofing their investments as much as possible, with a heightened focus on energy efficiency. The private rented sector is expected to see further moves to increase minimum energy efficiency standards, so investing in new-builds can avoid future headaches.
Neil Smith, Paragon Bank Head of Surveyors, said: “Portfolio landlords usually have in-depth knowledge of local student markets to the point where they know the prime local areas and even the favoured roads that provide a strong sustainable student rental demand.
“With demand for university places forecast to rise over the next few years, there will be greater need for student accommodation.
“Some of this will be met by Purpose Built Student Accommodation, but the traditional student property provided by private landlords will remain very much part of the mix.”
Read this article for a more in-depth look at the pros and cons of investing in student accommodation in the current market.
If you’re looking for your next property investment opportunity, get in touch with BuyAssociation today to find out more about our current and upcoming projects across some of the highest-yielding areas in the UK, including university towns and cities.
