New research reveals that student property portfolios based in smaller university towns or cities typically generate the best returns.
The findings, from Paragon Bank, reveal the 10 best locations for student property investment, highlighting the places where investors can generate the highest rental yields.
Swansea tops the list with an average yield of 9.56 per cent for student property, with an average property price of £231,534.
Towns and cities with just one university deliver some of the best yields, with seven of the top 10 only having one main higher education institution.
Student populations in these locations were also typically smaller at less than 25,000, suggesting that the best returns are not always found in major cities.
The next highest-yielding location is Hull, home to 14,255 students, where the average student property in the city generates a return of 8.68 per cent per annum. Of the top 10 locations, only Liverpool, Coventry and Leeds had more than one university.
Liverpool, the highest yielding major city with two or more universities, had an average property price of £225,178, with an expected rental return of £18,569 a year on average, an 8.25 per cent yield.
According to The Mistoria Group, investor enquiries for student accommodation in Liverpool, Salford and Bolton has surged over the last six months, up 21 per cent from UK and international investors.
Misteria managing director Mish Liyanage says: “Without doubt, investors achieve considerably higher yields with property let to students, compared to those let to non-students in the same town or city.
“For example, student landlords in Liverpool made an average gross rental yield of 13 per cent in the third quarter of 2021, compared to nine per cent for those who did not let to students.
“Student property can either be similar to a normal buy-to-let, where the whole property is rented between friends who co-habit, or a student HMO where students rent each room individually on their own tenancy agreement.
“A property is deemed an HMO if at least three tenants live there, forming one household and sharing bathroom or kitchen facilities with one another. Investors can currently acquire a four bed HMO for students and professionals, fully refurbished and furnished and tenanted for the coming year, for less than £175,000 in Liverpool.
“Investing in student HMO accommodation offers a long-term investment option, as the property is highly likely to be in constant demand throughout the calendar year.”