Buy-to-let peaks in student towns

Tuesday, 19 August 2008 12:00 AM

Buy-to-let landlords are attracting yields of over ten per cent in some of the country's largest university towns, according to new research.

According to a poll of delegates to the Property Investor Show, Nottingham, Durham, Manchester, Hull and Bangor are the best student towns to buy rental property.

Nottingham leads the way when it comes to buying rental property.

With low average prices and higher rents, Nottingham University offers the highest return on investment - with average rental yields increasing by 1.13 per cent since last year to 10.19 per cent.

Durham follows close behind with average rental yields of 9.23 per cent.

Manchester, Hull and Bangor complete the top five most profitable towns, with student landlords in these towns achieving an annual rental yield in excess of seven per cent.

"Investors may think that they are buying into a weak market, but as this research shows rental yields are on the increase and buy-to-let investors have a great opportunity to capitalise on the increasing demand for student accommodation, whilst taking advantage of lower house prices," said Nick Clark, managing director of the Property Investor Show.

"There will always be a sustained demand for properties which will produce a far greater annual rental yield than the average buy-to let property.

"In fact, it could be as much as six to seven per cent more."

The worst performing towns are Warwick and Crewe with rental yields of 3.92 per cent for each town.

The average rental yield of 7.9 per cent for the top ten university towns outstrips the UK average of 6.4 per cent for other buy-to-let properties, as property prices drop by 17 per cent and rents increase by eight per cent since this time last year.

Yet, potential buy-to-let landlords may find searching for an appropriate deal challenging, after research from MoneySupermarket found the number of available mortgages in the sector has fallen from 4,384 to 307 in the past year.

Jumping on the student bandwagon earlier today, Paragon, however, finds Durham - which has one of the country's smallest student populations, with only 17,410 students - is the best performing city.

According to the buy-to-let specialist the city generates an average yield of 13.94 per cent, followed closely by Nottingham (13.56 per cent).

"Student property can generate great returns because they are usually let on a per room basis, which tends to produce a better yield than letting the property to a single occupant," explained John Heron, managing director of Paragon Mortgages.

"Investors who anticipated the growth of a particular university and purchased property when prices were below today's level will be making even better returns," he concluded.

Chris O'Toole

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