New research undertaken by crowdfunding platform Property Partner has revealed that buy-to-let properties in close proximity to universities in the North-East achieve the best performing rental yields in the UK.
With hundreds of thousands of undergraduates heading off to university for the first time in September, parents across the county will be working out ways in which they can help fund their offspring’s accommodation bills.
An increasingly popular move is for parents to invest in property in the towns or cities their children have chosen to study in.
In such cases, property-investing parents will want to know where they can secure the best possible rental yields.
Property Partner, which put together a list of 86 university towns and cities across the UK, ranking each local property market by net rental yield, found that the major towns and cities of the North East came out on top.
Sunderland finished top of the tree (with a net yield of 6.9%), while Middlesbrough (5.9%) and Newcastle (4.3%) also made the top ten.
All three of these areas have average house prices that could be classed as very affordable, with that definitely being the case when looking at Sunderland and Middlesbrough (£65,201 and £56,272 respectively).
Birmingham, home to Aston University, Birmingham City University and the University of Birmingham, offered investors the third best rental yields (4.5%).
With an average asking price of just £116,732, buying a home in Birmingham is cheaper than most cities, which ensures that higher rental yields are a greater possibility.
What’s more, major infrastructure projects such as HS2 – which would directly benefit Birmingham and its surrounding areas – are in the pipeline, which increases the likelihood of investors experiencing strong capital returns in the long-run.
Manchester, another city with a massive student population, also scores highly for rental yields.
All three of Greater Manchester’s higher education establishments – the University of Salford, the University of Manchester and Manchester Metropolitan – made it into the top ten.
Healthy rental yields of 4.4% or 4.3% can be expected in parts of the city, while in Salford rental yields of 4.4% can be achieved and an average asking price of £131,863 will lift the hearts of potential investors.
Salford and Manchester have both undergone significant regeneration in recent years, with more infrastructure, transport and business projects on the way, which means the potential for capital growth is once again strong.
Edinburgh (net rental yields of 4.4%), Nottingham (4.1%) and Coventry (3.9%) made up the rest of the top ten. All three have large student populations, making them a hotspot for student housing.
For once, though, London and the South East are not the dominant force. If parents are looking for investor-friendly university cities, they would be advised to steer clear of London and its environs.
Huge house price rises in recent years have meant the yields on buy-to-let property being squeezed.
You might be able to charge plenty of rent in London and the South East, but the homes cost a lot more to buy in the first place – which ensures that healthy rental yields are harder to come by.
In the report, the capital was responsible for six of the bottom ten ranking universities for rental income.
Imperial College, located in plush, high-end Kensington and Chelsea, offered the lowest yields of any university area, at just 1.3%.
So, for parents of undergraduates heading to London to study, investing in property might not be the best way of funding your child’s rental costs.
Separate research from online mortgage lender LendInvest threw up remarkably similar results.
Sunderland, once again, topped the table of the best student locations for landlords.
According to the figures, those who invest in properties in Sunderland can expect to experience rental yields of 6.5%.
The next best location was Manchester, with average rental yields of 6.2%.
Birmingham, Coventry and Newcastle also made LendInvest’s top 10 list of the best student towns for landlords.
In the battle of the Oxbridge universities, Oxford comes out on top when it comes to rental yields (with returns of 3.9% in the 'city of dreaming spires' compared to 3.6% in Cambridge).
Student towns and cities are generally an excellent option for investors – parent-investors or otherwise.
Tenant demand is guaranteed, house prices are often reasonable and rental yields are generally healthy.
As we mentioned before, though, London isn’t the most profitable destination when it comes to student property – far from.
Other university town and cities away from the capital are likely to return far healthier rental yields.