Buy-to-let landlords facing increased taxation and diminishing profits could find better rental yields in UK towns and cities with a large student population, according to recent findings by Totally Money.
University towns and cities, such as Liverpool and Middlesbrough, where house prices are generally more affordable, offer rental yields of up to seven times higher than in London.
The research shows that two postcodes close to two of Liverpool’s three universities, L7 and L6, took the first and second spots for property investment, with rental yields of almost 12%. Average rents in the two postcodes were £1,162 and £1,046 per month respectively, whereas house prices were just £118,225 and £108,940.
Middlesbrough’s TS1 town centre postcode, home to Teesside University, took third place, with an average rental return of 10.94%. The area has an average rent of £595 per month, but an average house price of just over £65,000, making it one of the most affordable hotspots to invest in.
The best rental yields in the capital are found in the east, with Plaistow, Manor Park, Chingford, Stratford, East Ham and Poplar all ranking in the top ten London postcodes for buy-to-let profits.
However, the lowest scoring rental yields outside of London were found in Bournemouth’s BH14 postcode, at an average of just 1.68%, followed by Crewe’s CW12, at 1.74%.
The research also found that all postcodes in the 25 lowest yielding areas have average house prices of more than £300,000, suggesting that more affordable property prices generate better rental yields, rather than more costly properties.
Top 10 postcodes for rental yields
|Position||Postcode||Town/city||Average monthly rent price||Average house price||Average rental yield|
|6||NE6||Newcastle upon Tyne||£883||£111,767||9.48%|
Jeremy Robinson, the Managing Director of guarantor service provider Housing Hand, responds to the report: “Landlords and letting agents that let to UK and international students know they are getting some of the best yields in the country. Students today want high-end accommodation, and are prepared to pay a premium price for ensuites, plasma TVs, premium white goods, super-fast broadband and security.
“Research shows that, outside London, students are paying an average of £568 rent per month. We know that students will pay more for shared accommodation that is close to a university. International students have even larger budgets for a rental property, especially those coming from the UAE and China. The low value of sterling means that many international students will be starting university in 2018 with a sizeable budget of between £1,000 and £2,000 a month.”
He continues: “We know that the number one choice for new students after halls is an HMO [House in Multiple Occupation], which offers excellent yields for landlords, as each bedroom is rented compared with a family home, where there are usually only two people on the lease.”
Are you encouraged to look to university towns and cities for your next property investment?
If so, we are pleased to offer both Landlord Property Insurance and Rent Guarantee Insurance that cover student landlords – get more information and quick quotes through our website.