Lender and savings bank Paragon Bank recently conducted research highlighting the top student property investment locations in the UK. The findings reveal that student property landlords with rentals in smaller university towns or cities generate the best returns on average.

The study might be useful for student property landlords hoping to identify which UK locations can generate the highest rental yields.

Towns and cities that could offer high returns

With an average property price of £231,534 Swansea takes the top spot as UK student property location with the highest average yield of 9.56%. In second place is Hull with an average return of 8.68% per annum.

By making comparisons between the student populations, the number of universities in a town or city and the best yields, Paragon Bank were able to uncover more about student property locations.

One of the key discoveries was that the best returns are not always found in cities with a high population of students. Seven of the top 10 locations only have one main higher education institution where the population of students in these areas were typically less than 25,000. Out of the 10 locations only Liverpool, Coventry and Leeds had more than one university.

According to Buy-to-let investment specialist and HMO provider The Mistoria Group, investor enquiries for student accommodation in Liverpool, Salford and Bolton increased up to 21% from UK and international investors.

Mish Liyanage, managing director of The Mistoria Group further explains: “Without doubt, investors achieve considerably higher yields with property let to students, compared to those let to non-students in the same town or city. For example, student landlords in Liverpool made an average Gross rental yield of 13% in the third quarter of 2021, compared to 9% for those who did not let to students.  

Student property can either be similar to a normal buy-to-let, where the whole property is rented between friends who co-habit, or a student HMO where students rent each room individually on their own tenancy agreement.

A property is deemed an HMO if at least three tenants live there, forming one household and sharing bathroom or kitchen facilities with one another. Investors can currently acquire a four bed HMO for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £175,000 in Liverpool.

Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year.”