Scottish university cities have been ranked as the best places for buy-to-let investors in the UK, with four out of five of the top cities being north of the border.
Edinburgh has been named as the top university location to make a good return on rented flats, due to a high demand for student accommodation. Aberdeen, Dundee and Glasgow were ranked second, third and fourth respectively, according to a study by Zoopla.
Only one English university town - Coventry - made it into the top five, coming second. Meanwhile, Edinburgh offers buy-to-let landlords an average rental yield of 6.11 per cent, the study said. Aberdeen had an average yield of 5.66 per cent.
By contrast, university cities in the north of England were found to be among the worst investment opportunities for buy-to-let landlords. Middlesbrough, where the main Teesside University campus is located, recorded the lowest average rental yield in the UK – a mere 1.47 per cent a year. Lancaster was the second-worst performer, while Lincoln University’s host city posted an average yield of 2.14 per cent, the third-lowest in the league table.
Meanwhile, high property prices in the south-east, especially in London and Oxford, made those university cities a bad option for buy-to-let investors.
Lawrence Hall of Zoopla said: “Scottish university cities are currently offering fantastic returns for UK landlords. Many Scottish universities are now internationally renowned, with thriving undergraduate and graduate environments.
“This means demand for rental accommodation in university areas is very high, as throngs of students compete to live near their campuses. Combined with Scottish house prices still remaining relatively low, this equates to excellent yields.”
The report claimed that a typical four-bedroom house in Edinburgh sells for £426,774, while monthly rental for such a property is around £2,171 - the highest in the UK. Properties in both Oxford and Warwick have higher selling prices than an Edinburgh home at £559,312 and £482,569 respectively, but the return is lower at £2,148 and £1,924 a month.
Mr Hall added: “Some may be surprised that the golden triangle of London, Oxford and Cambridge is not producing higher yields.
“However, given those areas have a pedigree of high property prices, buy-to-let investors there would likely spend a higher proportion of rental income paying off their properties’ mortgages than their counterparts north of the border.”
Anna Renton, director at Edinburgh-based Grant Property Investment and Management, said regulations such as the House of Multiple Occupancy (HMO) licence, make student accommodation generally higher quality in Scotland than south of the border.
She said: “Regulations in Scotland are stricter than those in England, creating a niche market as quality accommodation is in short supply. This pushes up rents, standards and occupancy levels, making Scotland an ideal investment location.”