Market boom goes against the tide

PUBLISHED : Wednesday, 03 December, 2008, 12:00am
UPDATED : Wednesday, 03 December, 2008, 12:00am

Falling property sale transactions in Britain may be forcing 150 estate agent branches to close each week, but the student housing market is booming.

According to property portal, university towns and cities had the most people looking for rental property during the summer.

Every town in the 20 most-searched-for locations on the portal's website had a university campus, with Lincoln, Oxford and Southampton topping the table.

'A-level results came out in August and since then there has been a scramble to secure privately rented accommodation by students,' company director Nicholas Leeming said.

'Often late applicants are not eligible for university accommodation. So while most students will have had their accommodation for the year secured some time ago, those who didn't achieve the results they expected have been busily looking for places to live before the start of term.'

Sales of student homes were buoyed by an influx of investors over the summer - university towns dominated sales markets, found. Investors were attracted to the above average rental returns available in this sector of the housing market.

According to research at London's Property Investor Show in September, the average rental yield for the top 10 university towns is 8 per cent. Figures from the Association of Residential Lettings Agents show this is almost double the level of return available on other buy-to-let properties, which is 4.9 per cent. Student housing rental returns are relatively high because tenant demand is large and growing, and sales prices are relatively low compared with mainstream residential property.

The university town of Nottingham has the highest returns with average rental yields rising by 1.13 per cent since last year to 10.19 per cent. Durham follows close behind with average rental yields of 9.23 per cent. The worst performing university towns are Warwick and Crewe with rental yields of 3.92 per cent for each town. Manchester, Hull and Bangor complete the top five most profitable towns. Landlords who let out student accommodation in these towns will achieve an annual rental yield of more than 7 per cent.

The research was carried out by comparing the average rent and the average house price for the university town, based on a three-bedroom house being let to three students. However, Mr Leeming warned, the sales value of student accommodation often rose more slowly than for mainstream residential property.

'Be aware that properties in student areas do not appeal to many buyers and this will really affect the price you will eventually be able to sell the property at. So make sure you don't pay over the odds,' he said.