Single university towns deliver best student yields

Landlords with student properties located in single university towns tend to generate the best yields, Paragon Bank analysis has revealed.

Seven of the top 10 locations for student yield only have one main university, which often means a lower proportion of purpose-built student accommodation.

Swansea was the top location for rental yield based on application data over the past two years, with the average rental income of £22,140 generating a yield of 9.56% against the average purchase price of £231,534. The city is served by one main university, Swansea University, which has 20,375 students.

Hull came second in terms of yields, with the average student property in the city generating a return of 8.68%. The location is one of the most affordable, with average property prices of £117,742. The city is home to the University of Hull, with 14,255 students.

Plymouth offers rental yields of 8.41%, with an average rental income of £22,461 compared to property prices of £267,287. The area is home to the University of Plymouth, with 18,410 students.

Richard Rowntree, managing director of mortgages at Paragon Bank, said: “When it comes to student property investment, heading to the major cities doesn’t always generate the best returns, as these figures demonstrate.

“Smaller towns and cities will typically have a lower proportion of purpose built student accommodation, which has become more commonplace in major cities, whilst major cities also offer a wider array of property that students can rent, such as city centre apartments or build-to-rent schemes.”

Liverpool (8.25%), Coventry (8.05%), Chester (7.92%), Stoke (7.86%) and Lincoln (7.84%) also generated strong yields.

Paragon went on to explain that places such as Salford and Huddersfield – where yields of 7.53% and 7.40% can be achieved respectively – are both examples of smaller locations where students can often be found in more traditional accommodation, such as houses in multiple occupation, and property is generally more affordable to buy, helping to generate better returns.

When asked what is appealing about renting to students, 79% of landlords responding to a Paragon survey stated that it is the ability to generate rental yields, rising to 83% amongst active student landlords.

This is followed by parents or guardians being reliable rent guarantors, appealing to 64%, and reliable demand, which was chosen by 63% of landlords who let to students

Despite the strong profits a relatively low number of landlords have a student property.

The factor is students are seen as riskier, as 31% of landlords surveyed said property damage from the demographic is a concern.

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