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Smaller university towns and cities continue to lead student rental yield table

Student let - Hero.jpg

Paragon Bank has revealed the locations where landlords letting to students can achieve the strongest yields, typically smaller single university towns and cities.

Analysing mortgage applications for properties located in popular student postcodes, Paragon Bank has found that landlords providing student accommodation in towns or cities with just one university typically achieve the highest yields.
 

Eight of the top 10 yielding university towns and cities only boasted one main university, extending to 14 when taking into account the top 20 yielding locations.

Derby topped the yield list, with landlords generating an average yield of 8.67% in student postcodes. The city’s main establishment is the University of Derby, which had 21,285 students during the 2020/21 academic year, according to the latest data available from the Higher Education Statistics Agency.


Pontypridd, home to a campus of the University of South Wales, was second on the list with a yield of 8.31%. Here, the average property price was the lowest in the top 10, as well as the rental income, making it a cheaper option for landlords wishing to purchase property. 

Making up the list of the top three yielding student locations is Hull, another small city with one university. Purchasing property in Hull also requires a lower initial outlay, £172,429 on average, but landlords serving the University of Hull market also typically generate lower levels of average annual rental income, resulting in typical yields of 8.12%.

Looking at the top 10 locations for student yields reveals that only two – Liverpool and Coventry - have more than one main university. Other locations on the list included Salford, Lincoln, Worcester, Plymouth and Durham.

Top ten locations for student rental yields

Location Average Rental Income Average Valuation Rental Yield Universities (number of students)
Derby £23,544 £271,563 8.67% University of Derby (21,285)
Pontypridd £9,918 £119,321 8.31% University of South Wales (23,150)
Hull £14,005 £172,429 8.12% University of Hull (14,615)
Salford £17,228 £215,326  8.00% University of Salford (23,955)
Lincoln £16,163 £202,835 7.97% The University of Lincoln (17,565)
Worcester £26,368 £331,765 7.95% University of Worcester (10,110)
Liverpool £24,780 £314,589 7.88% University of Liverpool (29,185) 
John Moores University (27,200) 
Liverpool Hope University (5,685)
Plymouth £32,226 £417,905 7.71% University of Plymouth (18,905)
Coventry £27,868 £362,405 7.69% Warwick University (28,110) 
Coventry University (39,145)
Durham £31,664 £420,441 7.53% Durham University (20,645)

Richard Rowntree, Mortgages Managing Director for Paragon Bank said: “Although major cities like London, Birmingham and Manchester often boast the largest student populations, they are not necessarily the best locations for generating yields in the student buy-to-let market. This is because such places are more likely to be home to purpose-built student accommodation and greater levels of competition, whereas smaller cities and towns have less competition from large-scale institutional investment.

“Something else we often see when looking at the best yielding student locations is relatively affordable property – the top five locations for yield have property valued below the national average of £278,000. Another common trend the top 10 yielding locations share is that they have smaller private rented sectors serving the student market.”

For further information contact:

Jordan Lott
Media Relations Manager
Tel: 0121 712 2319
www.paragonbank.co.uk 

Notes to editors:

Paragon’s analysis is based on applications over the past 24 months for property within identified student postcodes.

Paragon lends to private individuals and limited companies and has mortgages suitable for single, self-contained properties, as well as HMOs and multi-unit blocks. Paragon can accommodate higher aggregate lending limits and more complex letting arrangements including local authority leases and corporate leases along with standard ASTs.

Paragon introduced its first product aimed at the professional property investor in 1995 and is a member of UK Finance, the Intermediary Mortgage Lenders Association (IMLA), National Landlords Association (NLA) and the Association of Residential Letting Agents (ARLA). 

Paragon Bank PLC a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £13 billion of assets under management and manages over 450,000 customer accounts.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551