Smaller university towns offer the best returns for student landlords

Smaller university towns offer the best returns for student landlords

0:03 AM, 12th October 2023, About 12 months ago

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Student landlords are seeing higher returns on their investments in smaller university towns and cities, according to a new analysis.

Paragon Bank says that the average rental yield for buy to let properties in popular student postcodes has risen from 5.63% in September 2020 to 6.66% in August 2023.

The highest yields were recorded in Stoke-on-Trent, where student landlords can expect to earn 9.42% on their properties, followed by Swansea with 9.22% and Glasgow with 8.08%.

The specialist lender based its analysis on mortgage applications in student postcodes and data from the Office for National Statistics (ONS) and the Universities and Colleges Admissions Service (UCAS).

‘Yields achieved by landlords serving the student market’

The bank’s mortgages managing director, Richard Rowntree, said: “Our latest analysis highlights how yields achieved by landlords serving the student market have consistently grown over the past few years.

“This coincides with rising tenant demand seen across the private rented sector and particularly in the student market, driven by record-high numbers of university applications going through UCAS.”

He added: “We continue to see that it is often properties found in smaller towns and cities that deliver the best returns for landlords.

“Despite not typically attracting the largest student populations, these locations can benefit from property that is more affordable to purchase, whilst having less competition from purpose-built student accommodation, with the highest concentrations of large developments usually found in major cities like London, Birmingham and Manchester.”

Better returns for student landlords

The bank says that smaller university towns and cities tend to offer better returns for student landlords because they have lower property prices and less competition from purpose-built student accommodation (PBSA).

Stoke-on-Trent, for example, has a population of 258,400 and one higher education institution, Staffordshire University, which has around 15,000 students.

The average property value in student postcodes is £145,813 and the average annual rental income is £13,730.

Swansea, which has a population of 246,500 and two universities with a combined student population of more than 25,000, has an average property value of £202,750 and an average annual rental income of £18,695 in student postcodes.

Glasgow is the only city with more than half a million residents to make the top 10 list of student rental yields.

The Scottish city has four universities, an average property value of £211,729 and an average annual rental income of £17,109.


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