For buy-to-let landlords, university towns can prove to be smart investment opportunities. With student accommodation in perpetually short supply, leveraging the right location at the right time can have a substantial upside. And using our internal data, we’ve looked at key trends to analyse the top university cities where landlords can potentially profit in the buy-to-let market.
Read on for our current top picks and see which cities in England and Wales made the list.
Best locations to invest in student accommodation
Student accommodation is in high demand, and some landlords invest in houses of multiple occupation (HMO) to facilitate student needs, e.g., house shares with up to four, five or even up to 10 tenants. But HMOs aren’t the only property type that can thrive in a university town – much depends on many factors, like demand, number of students and average rental prices. The table below reveals ten of the top university cities in England and Wales, according to Molo’s internal research.
Ranking | City | Gross yield | Number of students per city | Combined number of properties in council class M and N | % of student properties in each city |
1 | Derby | 5.34% | 20,955 | 1,894 | 1.67% |
2 | Hatfield | 4.38% | 31,940 | 1,246 | 2.47% |
3 | Preston | 5.41% | 28,325 | 1,793 | 2.62% |
4 | Reading | 4.53% | 19,390 | 1,932 | 2.52% |
5 | Durham | 6.67% | 22,230 | 5,280 | 2.08% |
6 | Swansea | 7.30% | 22,290 | 3,829 | 3.55% |
7 | Portsmouth | 5.14% | 26,500 | 3,604 | 3.82% |
8 | Bristol | 4.59% | 68,655 | 8,225 | 3.90% |
9 | Manchester | 6.40% | 83,390 | 9,569 | 3.85% |
10 | Canterbury | 4.73% | 24,660 | 3,649 | 5.14% |
1)
Derby
Derby offers a historic city and vibrant arts scene alongside extensive parks and waterways and is an attractive lifestyle draw for students. Home to the University of Derby, over 20,000 students live in this diverse, culturally rich city. That’s just under 3% of the population.
Meanwhile, major rail links to nearby cities mean Derby is well connected, be it local countryside villages or larger cities like Nottingham and Sheffield. Average rental yields in Derby are slightly above 5%, which is higher than the UK national average.
2)
Hatfield
Anchored by the pioneering University of Hertfordshire and its 30,000-plus students, Hatfield strikes a balance as a centre of innovation and an affordable, green garden town. With the university’s strong expertise in areas from aerospace to creative arts, Hatfield supplies talent and thriving industries.
For prospective landlords and tenants, Hatfield is the ideal commuter town and only 40 minutes to London via train. There are also good connections to Cambridge, as well as Stansted and Luton airports.
3)
Preston
Home to the nearly 29,000 students at the University of Central Lancashire (UCLan), Preston delivers thriving nightlife and a lively city featuring unique landmarks like the imposing Harris Museum and iconic town hall.
With extensive parks, shopping centres and convenient transport connectivity via rail to Manchester, Liverpool and Blackpool, Preston offers many of the features landlords look for when investing. At £730 per month, average rents will also likely appeal to a large student population while potentially offering landlords strong, sustained rental demand, especially as UCLan continues expanding its state-of-the-art campus.
4)
Reading
Reading is located just a 40-minute train ride west of central London and mixes old architecture with major technology companies like Oracle while also hosting around 19,000 university students that keep the city’s restaurants and bars busy.
With all these tech jobs and students around, Reading’s population and economy look promising going forward. For property investors, this translates to an average gross yield of 4.53% and monthly rent of £1,300-plus.
5)
Durham
When a place is known as a ‘university city’, there’s every chance that it offers investment opportunities for landlords in the student buy-to-let market. Durham also offers landlords impressive yields of 6.67% and more than 20,000 students who are potentially looking for rental accommodation.
At 5,000-plus, it also features a high number of properties exempt for council tax. Beyond its university appeal, Durham is a bustling cathedral city with a rich history and lively nightlife with acclaimed pubs, bars and clubs, such as Osbournes and Loft.
Locations with highest rental yield
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- Calculate expected yield based on your property value
- Calculate the avg. monthly rent and compare results with any location on the map
Cities with the highest proportion of student accommodation
While opportunities exist across many university cities, in locations with an especially high saturation of student housing, standing out from the competition becomes imperative for attracting and retaining tenants year after year.
Rank | City | Percentage of student accommodation |
1 | Nottingham | 11.79% |
2 | Exeter | 10.99% |
3 | Oxford | 9.33% |
4 | Newcastle | 8.34% |
5 | Leicester | 7.13% |
6 | Cardiff | 7.06% |
7 | Coventry | 5.86% |
8 | Sheffield | 5.56% |
9 | Brighton | 5.36% |
10 | Canterbury | 5.14% |
Among popular university cities in England and Wales places like Nottingham, Exeter, Oxford, Newcastle and Leicester stand out for their high percentage of total housing catering just to students – from nearly 12% in Nottingham to over 7% in Leicester.
With dense concentrations of purpose-built student accommodation and HMOs around campuses, student housing in these cities verges on saturation. For individual landlords competing in such crowded rental markets, differentiating your offerings becomes essential to attracting and retaining good tenants year after year.
Making properties stand out often hinges on those small touches that students appreciate. Ensuring fast, reliable internet and perhaps including bills in the rent can help make a difference. Things like bike storage or parking space may also be attractive.
Landlords looking to thrive in ultra-competitive cities should consider what they can do around the property as well, whether it’s installing premium fixtures, smart home tech like digital door locks, eco upgrades such as solar panels or finding additional space with storage. Outdoor enhancements, such as barbeques and furniture, also entice tenants.
Being flexible on leases can also help, offering contracts for different start dates to accommodate the varied needs of students. It also helps to be as close to the university as possible or nearby helpful transport links.
Essentially, injecting such differentiation into student rentals can help you command attention and maximise rental yields, even within properties in popular but saturated markets.
Locations with highest rental yield
- Explore the map
- Calculate expected yield based on your property value
- Calculate the avg. monthly rent and compare results with any location on the map
Why is student accommodation attractive to landlords?
For many landlords, student housing offers a type of property that tends to see pretty stable demand. There is almost always a healthy appetite for rentals in university towns and cities, especially affordable options close to campuses. Compared to young professionals who may buy homes after a few years, students tend to rely on renting for their full-time at university. This can translate into a lower turnover of tenants – or, at least, a consistent rate of tenants in sync with term times.
The HMO set-up preferred by students also allows landlords to collect rental income from multiple occupants under one roof. And student lets typically follow university terms, giving landlords the flexibility to review pricing every six to 12 months to keep up with the market. Not only that, but HMOs can provide higher yields compared to traditional buy-to-let properties.
Final thoughts: Top university cities
If you plan on investing in a buy-to-let located in a university city, you need to do your due diligence and find a spot that meets your requirements. Using Molo’s data, you can dive deeper into the university scene and see the top options available, whether your demands are rental yields, university population or average house prices.
If you’ve found the perfect university city, Molo offers a range of mortgage options, including HMO mortgages and more.
Molo’s methodology
We determined the best cities to purchase student accommodation based on a range of metrics that include:
- Gross rental yield
- Average monthly rent
- Property purchase price
- Number of students per city
- Number of properties in council classes M and N
- Percentage of student properties in each city.
Properties with council classes “M” and “N” relate to homes exempt from council tax due to being inhabited by students.
In order to calculate the average gross yield of a location, Molo used internal data for monthly rental income. To calculate the average property price, we combined internal data on average property value and conveyancing fees, as well as stamp duty.
The gross yield was then calculated by taking the annual rental income and dividing it by the sum of the average property price plus the average conveyancing fee and stamp duty based on the property details provided. Locations with a gross yield under 4.0% were excluded from the analysis.
