University Cities as top BTL investment hotspots

When it comes to investment in the UK, there are many factors that one needs to look into before making a purchase decision – a key component would be the type of property followed by the location that would provide the best returns.   

A savvy investor would look into investments that appreciate with time and offer good rental returns. With international properties raking in high returns, striking while the iron is hot in the buy-to-let sector, would be a preferred choice for smart investors.  

TotallyMoney, a credit report company, conducted a survey of 580, 000 properties across Great Britain in order to rank buy-to-let (BTL) yields from the highest to the lowest.

The survey discovered that properties located in areas with a high density of students generated the highest rental yields.

This might not come as a surprise considering that many world-renowned universities hail from the UK: 10 of the world’s top 100 QS-ranked universities is from the UK, making it the second highest nation on the record.

The influx of students into the UK has resulted in the growing demand for commercial properties such as purpose built student accommodation (PBSA) and residential properties situated at these university cities.

CBRE’s first-ever Student Accommodation Index also revealed that capital value growth across all student properties in the UK was 6.5% as of September 2018, compared to just 4.5% the previous year. The net rents also showed a rise of 3.4% over last year.

The survey also highlighted particular regions in which the student population is noticeably high due to the presence of established universities. Cities such as Liverpool and Manchester boast some of UK’s highest rental yields.

Liverpool


Liverpool is the second best university city in the UK. Source: Liverpool Echo

With a combined student population of 70,000 and three well-known universities,  Liverpool has helped boost demand for rental properties, making it the second-best BTL  city.

Student properties near postcode L7, where the University of Kensington is located, generate an average rental yield of 9.79%, whereas accommodation near the city centre, close to the University of Liverpool, has average yields of 9.33%. A total of six Liverpool postcodes are in the top 25 best buy-to-let areas for 2018.

Liverpool was also voted as the region with the best city life in the National Students’ Choice Awards. Students describe it as being very energetic, spirited, ambitious and an amazing city overall to be in

With the rising number of international students choosing Liverpool as their preferred destination for tertiary education, BTL properties with close proximity to universities promises a better rental yield.  

Manchester


The University of Manchester, one of the top universities in the UK. Source: New York Post

With four internationally ranked universities and a combined student population of 100,000, Manchester has a strong presence in the BTL market.  The city was rated by QS ranking as the third best university city in the UK.

Manchester has an average rental yield of 7.07%. Properties around the University of Manchester – which has the largest student community of all UK universities – provides a sustainable rental yield of 6.89%.  

As the UK’s second biggest city and second most affordable city for students, Manchester is ranked 51st for affordability, hence why a substantial amount of students fly into Manchester for their tertiary education. The affordability is all the more reason why BTL properties near universities are of high demand.

Birmingham

Get bullish with Birmingham. Source: CSI Prop

Birmingham is seen as a good alternative for investors who are looking to obtain good rental returns and intend to avoid buying in cities with higher property prices.

The UK’s second largest city is home to two leading universities, Aston University and Birmingham City University, where property values have soared due to rising demand. Recent research by Urban.co.uk revealed that Birmingham has the highest returns for property surrounding a university, with an impressive 11.66%!

Adam Male, founder of Urban.co.uk believes that the northern region provides a much more attractive proposition in terms of rental yields and these areas also happen to be homes to some of the UK’s top universities.

These are some aspects that landlords should consider when choosing to invest as it gives them a more affordable, yet promising step up the investment ladder.  

Are University Cities the next big thing?


UK student housing sector is surely on the rise. Source: BSES

For investors who are looking to take advantage of the pound’s affordable rate, properties in university cities are rather attractive investments.

Mark Moloney, head of brands and communications of TotallyMoney said, “Year after year, there’s a constant flux of students looking for somewhere to bed down for the night, so it’s no surprise that university cities offer landlords the highest buy-to-let yields. Demand is high, and landlords may use this as an opportunity to drum up competition between tenants and push rental yields higher.”

He also reckoned that investors need to be well-armed before diving into the world of property investment. They need to be well aware of aspects such as the best BTL mortgage rates and to be on top of their credit rating.

It is important for investors to focus on property investment in areas that can give them the highest yield and hence, generate ample revenue. The current state of properties in university cities – high demand coupled with good rental yields, undoubtedly makes Liverpool, Manchester and Birmingham a hotspot for BTL investment.

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Birmingham, the next ‘LONDON’?

Urban regeneration has transformed Birmingham into a big capital city
Urban regeneration has transformed Birmingham into a big capital city

As the world progresses into a new era and populations grow, cities, too, will evolve, transforming from nondescript outer suburbs into big capital cities, like Manchester, Liverpool, Birmingham – even Kuala Lumpur. Infrastructural growth is the main catalyst for the changes that attract migrants, causing an increment in population numbers. Thus, small cities become capital cities.

In the UK, some of the most exciting cities today in terms of population, job and infrastructural growth are Birmingham, Liverpool and Manchester.

Research compiled by Centre for Cities cites Birmingham as the second fastest growing city after Liverpool from 2002 – 2015, increasing from 9,800 to 25,800 people — 7 times faster than London over the same period. This is impressive, given how London had completely eclipsed Birmingham in the past. How the tides have changed!

Knight Frank reports that the number of people living in Birmingham will rise by 171,000 to a total of 1.3 million people by 2039, especially with the expansion of the HS2 high-speed rail line being built in central Birmingham and nearby Solihull, followed by other regeneration projects.  A sweet enticement to new investors indeed.

Birmingham: One of the Best Performing Cities in England & Wales

In the face of this renaissance, this booming city, also fondly known as “The City of A Thousand Trades” maintains its status as the heartland for British industry. The growth of the motor car as well as manufacturing continues to support the industrial sector in England and Wales,  creating more job opportunities and attracting more people — many of whom have relocated from London.

Between 1998 and 2015, job growth in Birmingham hit 30%, representing around 30,600 jobs in total.

Biggest Growth in City Centre Population & Jobs in England and Wales

Source: BirminghamLive
Source: BirminghamLive

However, despite the massive development and job growth, Birmingham is facing a shortage of housing. Between 2011 and 2016, only an estimated 8,000 new houses were built, whereas the actual demand was around 20,000.

The latest data by Hometrack shows that Birmingham is at the third place of house price growth in England, after Manchester and Liverpool, whilst London remains at the bottom.

Manchester clinched top spot at 7.4% growth, followed by Liverpool at 7.2%, and Birmingham at 6.8%. London stayed somewhat flat at only 0.7%.

The average price in Birmingham was at £161,200, slightly lower than Manchester at £166,100, and Liverpool, at £121,900.While price growth in London has been static, house prices there are more than double the national average at £494,800!

Source: Hometrack
Source: Hometrack

Clearly, cities in the Northwest received high capital gains over the last 12 months, yet there is still much room for growth.

Source: Hometrack
Source: Hometrack

The outlook for the housing market in Birmingham appears rosy, thanks to its economic growth thus far.

The region’s strong performance is mainly attributed to its manufacturing sector. In 2016, manufacturing made up 11% of employment in Birmingham, compared to the average for UK cities of 8.8%.

Due to costly house prices, as well as lesser employment opportunities, many Londoners, especially millennials, are relocating to Birmingham,and the other booming cities of Manchester and, Liverpool .

Ultimately, urban regeneration has played a vital part in these cities’ transformations, influencing the movement of millennials towards greater opportunities such as education, jobs and employment options. Savvy investors are starting to see the opportunities in store for Birmingham. Are you an investor? Are you thinking of making your money work for you? Then then you don’t want to miss out

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