Compared to those landlords who are looking to the wider buy-to-let market, those with student properties in their portfolios are, on average, netting yields of 25 per cent more. Indeed, portfolios that include student property generate an average gross yield of 7 per cent compared to 5.6 per cent for those without student properties.
Where student property made up more than half of a landlord’s portfolio, the average yield rose to 8.6 per cent – students now account for 12 per cent of lettings in the buy-to-let market.
Nigel Terrington, Paragon Group’s chief executive, said: “Strong tenant demand in the student market is driving yields in that sector. If landlords select the right type of property in the right location, the returns from the student market can be extremely healthy.”
According to the research, towns that are home to modern, expanding universities are experiencing strong tenant demand as the local lettings market tries to keep pace with the growing number of students.
Middlesborough, Chester, Huddersfield, Leicester, Hatfield, Ipswich and Canterbury are all experiencing strong growth in student tenant demand, in addition to the traditional redbrick university cities of Sheffield, York, Oxford and Bath.
And it appears that the traditional image of student tenants is out of date. Student landlords typically have lower void periods than the wider buy-to-let market, with the benefit of an annual let (property still has to be paid for even during summer) and frequently a parental guarantee. Rental income per property also tends to be higher as landlords typically let to students on a per-room basis.
Terrington added: “Despite the ‘Young Ones’ image of students being rowdy and destructive tenants, the reality of modern student lets is quite different. The days of grants have long gone and students are more focused to make the most of their student debt-financed opportunities.
“Whilst there will always be a social element to university, students are looking after the property better to avoid losing deposits and incurring costs for repairs and replacements. A significant element in this is that the quality of student sector property stock is in considerably better condition than it was in the past due to a combination of increased investment by landlords and stronger regulation.
“Most student landlords will have let their property for the following academic year by early spring due to the strong level of tenant demand and the competition between students for the better quality properties is fierce. This gives pricing power to the landlord.”
