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Smaller towns and cities drive student rental returns growth

Stoke on Trent.jpg

Analysis by Paragon Bank has revealed increasing returns on buy-to-let investments serving students, with the strongest yields seen in the UK’s smaller university towns and cities.

Through analysis of mortgage applications in popular student postcodes, Paragon Bank has found that yields achieved by landlords letting to students have steadily increased from an average of 5.63% recorded in September 2020 to 6.66% in August 2023.

The greatest returns are often found in the UK’s smaller university towns and cities, with Stoke-on-Trent topping the list of the top 10 locations for student rental yields. The Staffordshire city has a population of 258,400 according to 2021 Census data and the city’s single higher education institution, Staffordshire University, is home to around 15,000 students.

In Stoke-on-Trent, the average buy-to-let property in student postcodes is valued at £145,813. Combined with an average annual rental income of £13,730, landlords achieve rental yields of 9.42%.

With average rental yields of 9.22% Swansea was identified as the second strongest location for student rental returns. Landlords serving students in Wales’ second city generate an average annual rental income of £18,695 through student properties valued at £202,750 on average. 

Glasgow is the only place with a population exceeding half a million to make the specialist lender’s list of the top 10 locations for student rental yields. With properties in student postcodes valued at £211,729 on average, landlords generate an annual rental income of £17,109, yielding 8.08%.  

Richard Rowntree, Mortgages Managing Director for Paragon Bank said: “Our latest analysis highlights how yields achieved by landlords serving the student market have consistently grown over the past few years. This coincides with rising tenant demand seen across the private rented sector and particularly in the student market, driven by record-high numbers of university applications going through UCAS.

“We continue to see that it is often properties found in smaller towns and cities that deliver the best returns for landlords. Despite not typically attracting the largest student populations, these locations can benefit from property that is more affordable to purchase, whilst having less competition from purpose-built student accommodation, with the highest concentrations of large developments usually found in major cities like London, Birmingham and Manchester.”  

Location Average rental income Average valuation Rental Yield Universities
Stoke-on-Trent £13,730 £145,813 9.42%

Staffordshire University

Swansea £18,695 £202,750 9.22%

Swansea University
University of Wales Trinity Saint David

Crewe £15,154 £170,722 8.88% University of Buckingham - Crewe Campus
Gloucester £25,656 £305,333 8.40%

University of Gloucestershire
The Royal Agricultural University

Aberdeen £11,349 £136,895 8.29%

University of Aberdeen
Robert Gordon University

Hull £10,146 £125,526 8.08%

University of Hull

Glasgow £17,109 £211,729 8.08%

University of Glasgow
The University of Strathclyde
Glasgow Caledonian University

Plymouth £24,335 £308,515 7.89% University of Plymouth
Salford £22,354 £284,450 7.86% University of Salford
York £32,522 £422,409 7.70%

The University of York
York St John University