According to Universities UK, there are over a 160 higher education institutions in receipt of funding from one of the UK funding councils. These institutions are spread far and wide across the UK, giving landlords a diverse range of potential student buy-to-let locations to choose from. While deciding where to invest can seem daunting at the outset, landlords can apply a few parameters to help narrow the field.
Market size
In terms of student density, Citymetric puts London at the top of the charts with over 40 different higher education institutions. Birmingham, the UK’s second city comes next with six, the same number as Edinburgh and Glasgow. The Northern Powerhouse also puts in a good show, with two universities in Sheffield, four in Liverpool, and an impressive five each in Manchester and Leeds.
Each of the top 100 institutions attracts more than 10,000 students each year, with the UK’s 40 biggest universities each boosting the population in their host city by over 20,000.
Landlords who want to take a detailed look at the market can visit UCAS for a map of institutions by region and HESA for a list of student numbers by institution.
Budget and financial objectives
Like any property purchase, budget and financial objectives are critical.
For more than a decade, London and the South East have been hard to beat for capital gains although investors need to be careful as prices in these regions, particularly central London, have been cooling.
Even still, landlords who want to get in on the capital’s student market need a big budget. Hometrack’s UK Cities House Price Index published in May 2018 shows the average house price in London is now more than four times that in Liverpool and double the average for all cities.
Outside of London, not only are house prices more affordable, yields are also higher.
Yield measures annual rent as a percentage of a property’s value, allowing a comparison of the income earned on property across different regions and relative to other investments.
In Paragon’s regular research in conjunction with BDRC1, landlords rated property in the North-West among the best buy-to-let investments for yield at 6.7%, followed by the West Midlands with 6.6% and the East Midlands with 6.2%.
Location
Having homed in on a particular town or city, the next step is to visit the area and get to know the very best locations for student rentals.
Students are surprisingly picky about where they will live, ruling out broad areas at a stroke if they’re not close to college or to key social hotspots.
Even within an acknowledged student area, there is often a ‘golden’ triangle outside of which rents drop away quickly.
Landlords are well-advised to walk the terrain, speak to local letting agents and make sure they understand the price dynamics fully before investing to make sure they don’t overpay.
Competition
Finally, it’s worth considering the level of competition in an area before investing.
Purpose built student accommodation has been on the rise in recent years, as insurance companies and local developers alike recognise the potential for consistent and steady yields in this market.
So far, against a backdrop of rising undergraduate numbers in full-time study, we’ve seen few reports where these developments have affected valuations or achievable rents in the more traditional market.
However, with a tendency to include attractive shared areas, sparkly bathrooms and kitchens and ubiquitous wi-fi, they are pushing up standards in the traditional sector.
Find out more
As a specialist mortgage provider, Paragon offers an extensive range of buy-to-let mortgages suitable for single, self-contained units, houses in multiple occupation and multi-unit blocks. Paragon’s buy-to-let mortgages are available via mortgage intermediaries. For more information, visit www.paragonbank.co.uk
18 July 2018
1. Source: Q1 2018 Landlords Panel study from BDRC based on 1,043 online interviews conducted between 9 and 20 March 2018, with members and associates of the National Landlords Association (NLA)