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.
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.
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 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?
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.