A recent survey by the Halifax revealed that house prices in the country's top-20 academically ranked university towns have typically risen by 88 per cent over the last five years - a clear five per cent above the national average. This growth appears to have been driven by two main factors - an increasing number of parents deciding to buy somewhere for their offspring to live during their student years and developers buying up larger properties with a view to cashing in on their multi-occupancy rental potential.
These figures, however, mask vast fluctuations between how the various different towns included in the survey performed. Manchester is said to have exhibited the strongest growth with property prices soaring by a mammoth 114 per cent since 1999.
Rebecca Williams of local estate agent Knight Frank says most of this growth was driven by a spiralling demand for smaller properties. "Parents are typically looking to buy two-bedroom properties," she says. "It saves their child having to pay rent and, at the same time, they can then let out the other bedroom to help cope with the mortgage. They can also often expect a healthy profit when they eventually sell the place. So, all in all, it often works out as an extremely lucrative long-term investment."
Bath was another high-achiever in the Halifax survey with house prices rising by 113 per cent. "Bath has an incredibly large student population as well as a chronic shortage of rental properties," explains Susannah Bennett of Hamptons who likewise reports that interest has been particularly keen for properties at the lower end of the market. "We've recently witnessed an unparalleled growth in the demand for one- and two-bedroom properties around the town centre as well as for larger ones situated on the outskirts that can easily be converted into multi-occupancy use," she says.
York took third place in the survey with property prices in the city rising by an average of 109 per cent. "The university's expansion has undoubtedly had a very big effect on the market and is continuing to drive up property value," confirms Hilary Pegrum of local estate agent Blenkin & Co. "Two- to three-bedroom Victorian terraced houses to the south of town out towards the campus have proved particularly popular," she adds.
However, not all the prestigious universities have witnessed such dramatic price rises in recent years. Some of them have even performed significantly lower than the national average. Oxford, for instance, has only managed 76 per cent growth, Cambridge 64 per cent, while areas around the principle London colleges only 55 per cent.
Nor have the property hotspots been limited just to the academically elite universities. In towns with less successful universities but
fast-growing student populations, prices are said to have, on average, doubled within the last five years.
Plymouth is a prime example of this - a university whose rapid expansion has witnessed local property prices rise by an impressive 131 per cent since 1999. Local estate agents report that as many as one in four of their buyers are now connected with the university in one way or another.
The northern universities, too, have, in general, outperformed those in the south with Newcastle (125 per cent), Birmingham (108 per cent) and Sheffield (107 per cent) all scoring well above the national average.
In addition to the investment potential of buying in university towns, there can also be a number of useful tax advantages.
Stamp duty, for example, can be avoided by buying below the £120,000 threshold, as can capital gains if buying the property in a child's name. From April next year, meanwhile, self-invested personal pensions (SIPPs) will be able to be used to buy residential properties - a move promising additional tax relief as well as the prospect of tax-free rental income.
However, in light of the considerable regional and local variations, it makes sound sense to select the type of property and its location with extreme caution. Also, if you are buying as an investment, it will often be prudent to consider holding on to the property as a rental asset for a good few years after the child has finished university before attempting to try and sell it.
It should also be borne in mind that there is no guarantee that the dramatic property price rises witnessed in some university towns in more recent years are necessarily going to be repeated.
Nevertheless, those concerns aside, the central finding of the Halifax survey still does seem to hold true. "It shows that property prices in university towns tend to outperform those in other towns," sums up Martin Ellis, chief economist with the Halifax.
Furthermore, with the student population continuing to rise, the rental potential looks likely to remain good. "A key benefit about buying in university towns is that there is always going to be a rental demand," says Ray Boulger, technical manager at mortgage brokers John Charcol. "You're guaranteed that new tenants will be coming into the town year after year and so buying to let can often generate above-average returns and work out as an extremely sound long-term investment."
Some to consider
Asia House, Princess Street, Manchester
Price: £205,000 Agent: Knight Frank Tel: 0161 838 7744
Lowdown: Fifth-floor apartment, 723 sq ft, two bathrooms, secure underground parking in converted Victorian packing factory, located around the corner from the university.
Price: £225,000 Agent: Blenkin & Co Tel: 01904 671 672
Lowdown: Spacious maisonette above a chocolate shop, south-facing garden, just within city walls, great views.
Providence Street, Greenbank, Plymouth
Price: £115,950 Agent: Haart Tel: 01752 269 414
Lowdown: Mid-terrace house in central area, close to shops and amenities, with its own enclosed rear courtyard.
Kensington Place, Bath
Agent: Hamptons Tel: 01225 312 244
Lowdown: Split-level apartment occupying the ground floor of a Grade II listed Georgian townhouse within walking distance of the town centre.