Landlords looking for a profitable investment should consider buying student properties in the North of England and Scotland, according to new research from easyMoney, a peer-to-peer lending platform.
Another analysis from a bank highlights that smaller university towns and cities may offer the best prospects for investors.
The research from easyMoney analysed the rental yields around the top 100 rated universities in the UK, using average house prices and rents to determine where landlords can get the best returns.
The study found that the areas around the University of Sunderland, Liverpool John Moores University and the University of Leeds offer the highest yields in England, with 10.1%, 8.9% and 8.8% respectively.
In Scotland, the University of Aberdeen and the University of Dundee also provide attractive returns, with 9.3% and 8.8% respectively.
'Landlords can get nervous when renting to students'
The chief executive of easyMoney, Jason Ferrando, said: "Landlords can get nervous when renting to students, but they provide you with a solid stream of income year-on-year that should more than pay for the potentially higher maintenance costs.
"The strongest yields are around universities in either the North of England or Scotland, where low house prices make it easy to turn a solid profit.
"This is particularly the case in Sunderland, where modest house prices should make it an attractive place for a first-time investor looking to start their portfolio."
He added: "On the other hand it's trickier around pricier areas in London, with their high house prices making it more worth your time to invest elsewhere."
Landlords can earn more by renting to students
The research also revealed that landlords can earn more by renting to students than to other tenants, as the average yield in postcodes with a university is 5.4%, compared to 5.2% nationwide.
The research also found that yields for the UK's most prestigious universities, such as Oxford and Cambridge, offered modest returns of 4.0% and 4.6% respectively.
The worst areas for landlords to invest in student properties, based on low yields, are the University of Worcester with just 2.7%, Aberystwyth University in Wales (3.1%), Edge Hill University in Lancashire (3.3%) and Loughborough University (3.6%).
Student accommodation investment prospects
Another analysis of student accommodation investment prospects comes from Paragon Bank which points to smaller university towns and cities offering higher returns.
Its analysis shows that the average rental yield in student postcodes has increased from 5.63% in September 2020 to 6.66% in August 2023.
The bank looked at data from mortgage applications, the ONS and the UCAS.
It found that Stoke-on-Trent has the highest rental yield of 9.42%, followed by Swansea with 9.22% and Glasgow with 8.08%.
Landlords serving the student market
Richard Rowntree, Paragon's mortgages managing director, said: "Our latest analysis highlights how yields achieved by landlords serving the student market have consistently grown over the past few years.
"We continue to see that it is often properties found in smaller towns and cities that deliver the best returns for landlords.
"Despite not typically attracting the largest student populations, these locations can benefit from property that is more affordable to purchase, whilst having less competition from purpose-built student accommodation, with the highest concentrations of large developments usually found in major cities like London, Birmingham and Manchester."
Average house price in student areas
According to the bank, Stoke-on-Trent with one university, has 15,000 students and a population of 258,400. The average house price in student areas is £145,813 and the average yearly rent is £13,730.
Swansea has two universities with more than 25,000 students altogether and a population of 246,500.
The average house price in student areas is £202,750 and the average yearly rent is £18,695.
Glasgow has an average house price of £211,729 and an average yearly rent of £17,109.
'Demand for student housing remains strong'
Simon Thompson, the managing director of Accommodation for Students, said: "Demand for student housing remains strong because student numbers are increasing - pushing up demand.
"However, some landlords are leaving the sector which is pushing up rents, but landlords need to invest carefully to achieve the yields mentioned in these surveys.”
He added: "There's no doubt that having a quality student home that is well maintained will always be in demand and student landlords should strive for high standards and they will enjoy the expected returns."
