Areas with the best student accommodation rental yields revealed

Steve Lumley·6 September 2021·6 min read
Areas with the best student accommodation rental yields revealed

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.