Cities best for student landlords

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The Independent Online

The city of Durham offers the best returns to landlords investing in student property with annual yields of nearly 14 per cent, research showed today.

Despite Durham having one of the smallest student populations in the UK, the city's relatively low house prices combined with its high rents enables landlords to make annual yields of 13.94 per cent, according to Paragon Mortgages.

Nottingham emerged as the second best city in which to invest in student property, with landlords there making annual yields of 13.56 per cent, followed by Manchester at 11.59 per cent.

Stoke, Hull and Derby all also offered double digit returns to landlords renting out student properties. University towns in the north of the country tended to outperformed ones in the south due to the combination of lower house prices and the good supply of terraced homes which are typically rented by students.

But at the other end of the scale, landlords investing in property in Oxford made average yields of just 3.55 per cent, while those in Cambridge made returns of only 4.38 per cent due to the high cost of property in the towns. Landlords in London fared little better with average yields of 4.92 per cent, despite charging the highest rents in the country of £102.85 a week, while investors in Kingston upon Thames made returns of just 4.45 per cent and those in nearby Guildford made 4.79 per cent.

Overall, the average landlord investing in student property makes an annual return of 7.17 per cent, receiving £9,685 in rent a year on a property worth £152,964.

John Heron, managing director of Paragon Mortgages, said: "Student property can generate great returns because they are usually let on a per room basis, which tends to produce a better yield than letting the property to a single occupant.

"Investors who anticipated the growth of a particular university and purchased property when prices were below today's level will be making even better returns."