Buy to let landlords facing increased taxation and dwindling profits could find better yields in UK towns and cities with a high student population, according to new research.
University towns and cities like Liverpool and Middlesbrough, where property prices are more affordable, offer rental yields up to seven times higher than in London, the study from by Totally Money reveals.
Two postcodes close to two of Liverpool’s three universities, L7 and L6 took the first and second hotspots for rental property investment, with yields of almost 12%. Average rents in the two postcodes were £1,162 and £1,046, whereas house prices were £118,225 and £109,940, respectively.
Middlesbrough’s TS1 town centre postcode, home to Teeside University, took third place, with an average rental yield of 10.94%. The area has average rents of £595 per month, but an average asking house price of just over £65,000, making it one of the most affordable spots to invest in.
The best yields in London are found in the East, with Plaistow, Manor Park, Chingford, Stratford, East Ham and Poplar all ranking in the top 10 London postcodes for rental profits.
However, the lowest scoring yields outside London was Bournemouth’s BH14, with an average rental yields of 1.68% and Crewe’s CW12 follows, with 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 house prices generate better rental yields rather than more costly properties.
‘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 a premium price for ensuites, plasma TVs, premium white goods, superfast broadband and security,’ said Jeremy Robinson, managing director of rental guarantor firm Housing Hand
‘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,’ he explained.
He pointed out that international students have even larger budgets for a rental property, especially those coming from the United Arab Emirates and China, adding that 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.
‘We know that the top choice for new students after halls is an HMO, 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,’ Robinson added.