The UK is home to some of the most respected universities in the world and growing student numbers, from both home and overseas. It is these factors that make the UK one of the best places to invest in student housing. However, there are cities where it is more profitable for student landlords to operate. Profitability is dependent on a number of factors, and some cities are better placed to benefit from these factors.
Key attributes
Attributes of profitable cities include; dual or multiple well-regarded universities; large numbers of students seeking accommodation; and property and development landholding a low capital value. These factors make it affordable to purchase properties and enter the market, and then have access to a large number of students within the city. If one of these factors is missing, profitability will be negatively impacted.
For example, London and Greater London have numerous well-regarded universities and the largest student population in the country. However the availability of property and land is low, and with an average property price of £1.5 million, it is hard for landlords to make a good return on investment. Certain postcodes in this area offer rental yields of just 1.93%.
Look to Northern England
For student landlords in search of good returns, Northern England appears the optimum place. According to a nationwide survey of 580,000 properties conducted by credit report company TotallyMoney, the three most profitable cities for student landlords are Nottingham, Liverpool and Newcastle.
Nottingham
Nottingham is home to Nottingham Trent University and the University of Nottingham, which have over 43,000 students between them. For the city overall landlord can expect a yield of 7.38%. However, the postcode area NG1 is the best location with an average yield of 11.99%. Aided by an average property price of £152,631, well below the UK average, this area is the best for student housing in the UK. A student landlord in this area can expect monthly rent of £1,525.
Liverpool
Liverpool is another strong location, with the University of Liverpool, Liverpool Hope University and Liverpool John Moores University attracting over 70,000 students. The best postcode area is L7, which can achieve monthly rent of £941 and a yield of 9.79% against a property price of just £115,398. L1 is similarly good as 9.33% can be achieved with a slightly higher property price of £118,754.
Newcastle
Newcastle and its large student population, around 50,000 students enrolled at Newcastle University and Northumbria University. In the postcode area NE6, landlords achieve yields of 8.43% from average property values of £118,789. NE1 also offers similar results, 8.33% against a higher property value of £161,053. A monthly rent of £1,095 can be expected.
Yields
Yields are a good indicator when choosing an investment property, however some cities offer a lower yield, but better prospects of capital growth. Coventry, for example, offers a moderate yield of 5.4%. The city is the location of two respected and popular universities – Coventry University and the University of Warwick and over 50,000 students. House prices have increased by 250% since 2000, so landlords can make both regular incomes and have very good prospects of capital growth.
HMOs
Properties offered by landlords, especially Houses in Multiple Occupation (HMO), are becoming more popular for students as they seek better affordability in their accommodation. The National Student Accommodation Survey found that 54% of all students live in properties provided by private landlords. The need for affordability is being recognised, with growing numbers of student-only properties, such as HMO, and falling numbers of Purpose Built Student Accommodation (PBSA). However, with increasing numbers of landlords turning to the student sector, location is becoming more important. There will always be demand for affordable student housing close to campus.
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References
Save the Student. 2019. Accessed 24th October, 2019, from https://www.savethestudent.org/accommodation/national-student-accommodation-survey-2019.html
Moneywise. 2018. Accessed 24th October, 2019, from https://www.moneywise.co.uk/news/2018-12-03%E2%80%8C%E2%80%8C/uks-buy-let-hotspots-revealed-student-living-tops-tables
One Touch Property Investment. 2019. Accessed 24th October, 2019, from https://www.onetouchinvestment.co.uk/news/buy-to-let-strategy/where-are-the-best-places-to-invest-in-uk-property-in-2019/
