Arthur looks at investment potential in 5 UK university cities
It’s September and the new academic year is already upon us! Over the coming weeks, university students will start at, or return to, their respective university cities to begin yet another term of parties, socialising and of course, their fair share of studying.
According to recent reports by HouseSimple.com, house prices in the UK’s top 50 university cities have risen by more than 27pc in the past 3 years. That’s a significant increase, translating to as much as £60,000 in some areas of the country. The CEO of HouseSimple.com has gone so far as to highlight this as an opportunity for parents, many of whom are expected to help cover the cost of rents. He states that “By investing in a second home [in your child’s university city], your child won’t have to pay living costs, as the rent will cover that, and the increase in capital value could cover the cost of tuition fees.”.
Arthur’s top 5 include:
A city home to around 60,000 students, combining the student population of both University of Nottingham and Nottingham Trent, there is no lack of demand for student accommodation in Nottingham. It’s a vibrant city with a wide range of nightlife options, making it an attractive place for students to spend 3 years. What’s more, house prices are still considerably low in comparison to the UK average of £213,972, coming out at just over £120,000. Despite low prices, the potential increase in house value over the next 3 years is predicted to be around £21,000, meaning investors are sure to make a sizeable profit.
Birmingham is the UK’s second largest student city, with more than 65,000 students from the 5 different universities based in the surrounding area. Lots of investment over recent years has transformed the city into a new cultural hub for students and residents alike. Birmingham city centre is also one of the UK’s top shopping destinations. With current average house prices at just over £156,000, values are predicted to increase by a huge £43,000 by 2019. On average, each student expects to pay between £70 and £80 per week in privately rented student accommodation. This provides high rental yield potential for investors looking to convert properties with lots of bedrooms into student lets.
Manchester is a city with a rich industrial historical heritage and now an even richer student scene. This is unsurprising considering its student population totals nearly 100,000, making it the largest of the UK’s university cities. Most students opt to live in the Fallowfield area where house prices and rent are slightly cheaper than the city centre. However, rents still fetch around £80 per week in this area, and often more depending on the quality of the property. At the moment, many young professionals are also relocating to Manchester due to the unaffordable living costs in the capital. The potential increase in house prices in Manchester over the coming 3 years is expected to be over £30,000.
The only southern city to feature in Arthur’s top 5, Southampton is known for its recently refurbished waterfront and maritime heritage. The city is home to 30,000 students and the number of international students attending the University of Southampton is increasing significantly year on year (like many other UK higher education institutions). International students are generally more likely to pay a premium for more luxury student accommodation. An increasing demand for more high-end student living options gives investors more scope as to which type of student accommodation they wish to invest in. House prices in Southampton are expected to increase by £37,000 in 3 years time.
York is undeniably one of the most beautiful UK university cities. Its gorgeous architecture and reliable transport links with Manchester, Leeds and London make the city an attractive option for an increasing number of students. Even though house prices are a little higher in York (av. £230,000) than the other university cities we picked, house value is expected to increase by an impressive £43,000. Student weekly rent is also on the rise in York and students often end up paying significantly more than residents in rent. This means that renting to students in York can produce significantly higher rental yields. Furthermore, as student numbers continue to rise, there is an increasing shortage of purpose built student accommodation in the city centre, which provides the perfect opportunity for investors looking to put money into new developments with guaranteed returns.