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High rental yields from student houses in northern university towns

Thursday 15 September 2016

Landlords who rent to students in Northern university towns are reaping the rewards of their investments with returns of nearly 7 per cent a year.

But industry experts have sounded a note of caution: letting property in student cities requires a keen understanding of the local market, as well as knowledge of the laws that govern rental provision and the ability to respond to the demands of tenants.

Two new studies have ranked university towns according to rental yields, and in each one Sunderland heads the list, with yields as high as 6.9 per cent.

And with the average property price in Sunderland of just £90,000, the North Eastern city is also the cheapest location to invest.

Manchester is in second place, according to analysis from LendInvest, which suggests rental returns can be as high as 6.2 per cent, based on an average property price of £135,000.

A combination of low investment cost and high tenant demand puts Birmingham at number three in the top 20 student towns. Here the average house price is £116,732 while average net yield is a solid 4.5 per cent a year.

However, industry experts warn that the implications of Brexit on the academic sector have yet to be fully understood; fears that fewer international students will be able to take advantage of educational schemes have been raised, although some universities will be more affected than others.

An understanding of the area, and how tenant demand is trending there, are vital for the astute BTL investor.

With interest rates at unprecedented lows, individual investors are starting to move away from traditional savings routes and take the initiative by making their money work harder for them.

Property remains an inherently strong asset class, and as the new research on Northern university towns shows, there are very competitive rental yields to be found in student housing across the UK.

Prolonged price rises in London and the South East have suppressed BTL property yields and six of the bottom ten ranking universities are in the capital. Imperial College, in Kensington and Chelsea, is the lowest in the country with a comparatively poor return of only 1.3 per cent.

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