The best rental yields that landlords with student accommodation can enjoy
are to be found in single-university towns, research reveals.
Paragon Bank
reports that those cities or towns that have just one university, and with
fewer than 25,000 students, are offering the best rental yields.
These locations offer the best investment opportunities for landlords and
potential landlords alike, the bank says.
Of the universities examined, the highest rental yield was seen in Swansea,
with 9.56%.
The University in Swansea has just over 20,000 students and it is followed
by Hull with a yield of 8.68%, and Plymouth with an 8.41% rental yield.
Student accommodation rental yields
Paragon Bank says that 14 cities and towns in its top 20 of student
accommodation rental yields had just one university.
The bank’s managing director, Richard Rowntree, says the reason for this
may be down to having a lower proportion of purpose-built student
accommodation (PBSA) available.
He says that PBSA is more common in larger cities and offers a wide choice
of properties for students to rent, including build-to-rent schemes and
city centre apartments.
Mr Rowntree said: “Small locations will offer traditional student
accommodation, such as houses in multiple occupation, and property values
are cheaper generally in these locations which can help generate better
returns.”
The managing director of Accommodation for Students, Simon
Thompson, welcomed the report from Paragon and said: “Student landlords
generally enjoy better yields from their property and here is a report
making clear that having student accommodation in a town with just one
university is certainly worth considering.
“The bottom line is that all student landlords need to provide quality
properties for student tenants and potential landlords need to research
thoroughly before investing in student accommodation to ensure that their
investment is successful.”
Landlords with student accommodation
The report from Paragon Bank also highlights that landlords with student
accommodation are seeing an increase in demand from potential tenants
despite the disruption being seen in further education from the Covid
pandemic.
The report highlights that one in four landlords have seen a rise in
student demand since the pandemic started, but more than half say they have
seen no change.
Just 20% of student landlords said that demand from tenants has fallen.
The research also highlights that the trajectory for student numbers is
‘positive’ which suggests that demand for student properties will continue
to grow.
Also, the report highlights that universities tend to be large employers of
local people, so landlords with accommodation in the area could pivot their
homes for families with children and young professionals who work for the
University to rent.
The bank also highlights that one in three student accommodation landlords
say they are thinking of investing in another student property to let in
the next 12 months.
For landlords who have a portfolio of at least 11 properties, this figure
rises to 50%.
And eight in 10 landlords say they are unlikely to sell their student
property over the coming year.
Appeal for landlords with student property
The research also highlights that the biggest appeal for landlords with
student property was, for 79% of them, to enjoy higher rental yields.
Among the factors for this enthusiasm is having guardians or parents who
can be reliable rent guarantors, with 64% of student landlords saying this
was a motivation.
Also, having reliable student demand for accommodation was a motivation for
63% of landlords.
Though the research also highlights that a common concern for student
landlords was growing competition from purpose-built student accommodation,
with one in three landlords saying they are concerned.
The second most common worry for landlords is property damage, for one in
three landlords.
Paragon also acknowledges that not every landlord will be enthusiastic
about student lets and points to data that reveals just 13% of all buy to
let investors in the UK have properties in this niche.
International students are returning to the UK
The good news for landlords doesn’t end with the research from Paragon,
with Bloomberg revealing that international students are beginning to
return to the UK, particularly to London.
They point to research from Savills that highlights that student
registrations have nearly doubled in recent weeks and that 70% of
applicants wanting properties in Canary Wharf are international students.
And some letting agents are beginning to push up rents because of the
growing interest.
Amelia Greene from Savills told Bloomberg that demand is like ‘having two
years’ worth of students who all want to move to London in September’.
The director of lettings at Canary Wharf for JLL, Lauren Hatcliff said that
the student accommodation sector is ‘well and truly back’.
She added that this is currently the busiest market that she has worked in
for more than 10 years.
However, agents say that with the Government’s stamp duty tax break saw a
number of landlords selling off their student and other rental
accommodation which means that there’s a shortage of stock and rents are
rising.
