Whether or not you want to rent to students, university towns and cities can be lucrative locations. New research shows where landlords can get the best rental yields in the UK.
In the year 2018-2019, there were around 2.38 million students studying at UK universities. The numbers have been gradually climbing each year, with hundreds of thousands of international students also choosing UK institutions.
As with the rest of the rental market, the student accommodation sector has seen many changes. The rise of purpose-built student accommodation (PBSA) has been one of the biggest shifts. Many students’ expectations of their homes during their university years have increased, and so has the standard on offer.
However, outside of the PBSA sector, traditional rental homes in these areas can perform very well. According to research from rental firm Howsy, average UK rental yields are now 4.4% in university locations. The firm has also compiled a ranking of which university campuses bring in the best rents for landlords.
Above average yields in these areas
Buy-to-lets in university locations in Scotland generate the best yields for landlords, says Howsy. Top of the list was the University of Dundee, bringing in yields of 7.2%. The next star performers were the University of Aberdeen (6.8%) and the University of Strathclyde (6.62%).
In England, landlords in the midlands and the north see the best returns from their investments. Properties close to the campus of the University of Leicester fetch the highest yields of 6.56%. After this, Aston University in Birmingham provides a healthy 6.5% return, followed by the University of Leeds with 6.41%.
Other northern areas with yields well above average include Nottingham (6.39%), Newcastle (6.3%), Liverpool (6.1%) and Manchester (5.2%).
Landlords in London struggle to get decent returns, it seems, even close to universities. Bottom of the list was Imperial College London where student property owners only see 1.7% yields. King’s College London (2.3%) and LSE (2.3%) are also below average.
Exam result turnaround means high activity
Now that the recent turmoil surrounding A-Level results in England is resolved, students will be scrabbling for accommodation. This will be good news for buy-to-let landlords offering property in university towns, says Howsy founder and CEO Calum Brannan.
“Of course, student tenants can have their downfalls, but so can any tenant in the rental space and the pros far outweigh the cons in terms of the carousel of consistent demand and income that they supply.”
“With many of the top universities not only attracting the best students but also providing rental yields way above the UK average, a university buy-to-let could be the key to a profitable investment in what are otherwise tough times for landlords at present.”
Students or young professionals?
For landlords, there are a number of benefits for letting to students. Contracts tend to be similar to HMOs, in that students take on separate tenancy agreements. This can mean that rental income is more consistent than classic buy-to-let.
There should also be a high level of demand in student-heavy areas. While some students prefer to just sign up during term-time, many are happy to take on 12-month contracts. This means void periods are often low, which is a big aim for any landlord.
On the downside, maintenance and repair costs can be higher. In some situations, students can be problematic as neighbours. Levels of demand may also vary depending on how much PBSA is available in the area.
For buy-to-let landlords who want to steer clear of students, university towns and cities can still be a great option. Many graduates will stay on and find jobs after finishing university, keeping demand high. As these areas already cater for large student populations, there are plenty of local amenities and attractions for young people, too.
