University towns and buy-to-let essentially go hand-in-hand. Students need a place to live and the vast majority of them are “natural renters”. Even if they were in a financial position to buy a property (which a few of them are), they are at a stage in their lives when flexibility is often hugely important to them.
The challenge for investors is finding property in suitable areas at a price which allows them to earn a solid rental yield. Fortunately, new research has identified the places buy-to-let property investors should target to achieve this goal.
Out with the old and in with the new
It is currently extremely difficult for property investors to achieve good returns in the “Ivy League” student towns of Oxford and Cambridge, or, indeed, anywhere in or around the Thames Valley area.
Quite simply, property prices are so high that it is close to impossible for property investors to set rents at a level which would generate a meaningful yield. The situation improves as investors head north. Even the major student destinations of Manchester and Birmingham still have property which is affordable enough for investors to achieve very decent returns.
That said, only M14 in Manchester still ranks as one of the highest-yielding postcodes in the UK and it’s questionable how long it will maintain that status given the way Manchester’s economy is powering ahead. Keep going into Scotland and investors can still buy affordable property in the near vicinity of both Edinburgh and Glasgow universities and expect to achieve excellent returns with it.
In fact, EH8 in Edinburgh and G21, G52 and G14 in Glasgow are all ranked among the twenty best-yielding postcodes in the UK. For the most part, however, property investors looking for the best yields need to go (slightly) off the beaten track.
The importance of “local universities”
Although the UK is internationally-recognized for the overall quality of its tertiary-education sector, for obvious reasons, the majority of international students tend to head to the UK’s most prestigious institutions.
Unfortunately, these tend to be the places with the highest property prices and, hence, the lowest yields (although, as previously mentioned, there are some exceptions). Universities which cater mainly to UK-domestic students can, however, offer excellent opportunities for buy-to-let property investors three postcodes which stand out as offering great returns and exciting future prospects are L1, L6 and L7 in Liverpool. These are closely followed by NE6 in Newcastle and LS6 in Leeds.
The key point here is that in addition to being university towns, these are all locations which are clearly trending upwards and look to have serious prospects for future growth (regardless of Brexit). NG1 in Nottingham is also interesting.
Nottingham is a very mature student market and already has a solid local economy; however it does still offer some room for growth. Investors with more time on their hands may be interested in BD1 in Bradford, SR1 in Sunderland and TS1 in Middleborough. These areas are all offering excellent rental yields at the moment, mainly due to their outstanding affordability, however their long-term growth may be at a slower pace than the locations mentioned so far.