As research reveals the most affordable student rental locations, Tepilo looks at why landlords can still achieve good yields in places where rents are lower.
Students renting homes are best off living in Hull, Sunderland and Dundee, according to new research carried out by student accommodation marketplace Student.com. These three British cities all made the top 10 most affordable cities for student housing globally.
Student.com recently released its “Cities in Focus: Global Student Accommodation Indicator” report, which highlighted the world's most affordable and least affordable cities for student housing. Only Auburn, Athens and Tallahassee – all based in the USA – were more affordable than Hull, the Yorkshire city home to the University of Hull and the UK's City of Culture for 2017. A culturally vibrant place, obsessed with music, football and rugby league, Hull has experienced a great deal of investment and regeneration in recent years and has a thriving student population, most of whom seek rental housing privately at some point.
With an average weekly rent of around £86, it took fourth place in the top 10 list, while Scottish city Dundee was in ninth with an average weekly rent of approximately £94. Dundee, a coastal city with a population of around 150,000 people and a student population of nearly 16,000, is home to the University of Dundee, a well-respected establishment which was crowned Scottish University of the Year for 2017, retaining its title from 2016.
In Sunderland, meanwhile – often viewed as one of the most affordable places to buy a home in the UK – students will be paying an average weekly rent of around £95 for their rental home, which makes it the tenth most affordable city in the world according to Student.com's findings. Sunderland, which has a long and proud industrial history particularly focused around shipbuilding, coal mining, glass making and limestone quarrying, is perhaps best known these days for its (recently relegated to the Championship) football team and its ability to be the first city to declare results in any UK election.
It is also home to the University of Sunderland, a leading research establishment with a student population of more than 16,000, located not far from Roker and Seaburn beaches and Sunderland AFC's contemporary Stadium of Light ground.
Between them, the three cities mentioned above have considerable student populations and lots of opportunities for canny landlords and investors. While lower rents might not sound like good news for landlords eager to pounce on the high demand for student accommodation, this is offset by more affordable house prices to begin with. This means your initial outlay is not as high, which in turn means rental yields are less squeezed.
You might not receive a very good return on your investment in the long-term, but that is the case with nearly all student houses. It's one part of the market where a short-term approach generally works best. Students, after all, are only likely to be spending a maximum of two or three years in a private rental home and may not be the most house-proud. While horror stories about damage are drastically overblown, it is the case that student homes are likely to experience a fair bit of wear and tear.
That said, demand is consistent and always very high, particularly in locations with large student populations. What's more, there is now higher demand for better-quality student accommodation where students are willing to pay more for a rental home that is less, erm, ‘studenty’. If you target this portion of the marketplace, not only will you be able to charge higher rents, you'll also improve your chances of achieving a decent return on investment if you ever come to sell in the future.
This is especially the case in major university cities such as Oxford, Cambridge and London. The University of Oxford and the University of Cambridge need no introduction – being arguably the world's two most famous higher education establishments – and they both attract many overseas students who are often willing to pay a bit more for student accommodation.
It's also the case in London, which is home to some of the world's very best universities in the form of King's College, Imperial College and LSE. All three cities have considerable student populations and are particularly popular with landlords and investors. Although properties are more expensive to purchase in the first place, this is offset by the ability to charge higher rents, achieve good rental yields and secure a better return on investment.
For students, renting a home in London, Oxford or Cambridge will be more expensive than Hull, Dundee or Sunderland, but the student rental market is still likely to be cheaper than the average rental prices in these cities and the opportunity to study at one of the world's foremost universities is always going to have appeal to a very large chunk of people.
The student accommodation market can be a lucrative one if the right properties are purchased in the right sort of areas. Like anything, this market has its possible downsides, but these are outweighed by the possible benefits.