University cities in the Midlands and the North offer the best property investment returns

We take a look at the average asking in each UK student towns and see which is giving the best yields alongside looking at the top five cities which stand out.

Peter Scully | 19th September 2019

There is a difference between turnover and profit and that difference can be significant. For example, London is notorious for its high rents, but these rarely translate into high yields for investors since property prices are so high that financing costs will typically take a substantial bite out of an investor’s net profit, especially now that the government has withdrawn mortgage tax relief.

In the Midlands and North, by contrast, tenants usually pay lower rents (on a like-for-like basis), but investors can make vastly improved returns (as compared to the south of England) because property prices tend to be massively more affordable.

In fact, according to research from investment portal One & Only Pro, there are seven cities in England (and Wales), which stand out above all others for investment yields and they are all University cities in the Midlands and North. Here is a quick guide to their top five picks.

Top 20 highest yielding towns

Source: TotalMoney

Newcastle

If you “missed out on Manchester” (although even now it’s not too late), then Newcastle should definitely be on your radar. In addition to its standing as a university town, it’s in the early stages of a process of economic regeneration which looks set to reinvigorate the city in the much the same way as the Northern Powerhouse initiative reinvigorated Manchester.

This means that investors who move quickly could see the same sort of gains as investors who spotted Manchester’s potential before it went mainstream.

Nottingham

Nottingham may be one of the most underrated investment destinations in the UK. Admittedly, it is a mature market and hence is unlikely to generate the sort of spectacular growth which may be possible in up-and-coming destinations such as Newcastle, but affordability is still good and year after year it delivers reliable, solid returns for property investors.

Leeds

If Newcastle looks like it could be “the new Manchester”, then Leeds may be “the new Salford”. Over recent years it has managed to transform itself from a place people went out of their way to avoid, to one of the coolest, most vibrant and fastest-growing parts of the UK.

Rapid population growth means rapidly-increasing demand for accommodation, including (and especially) high-quality rental accommodation and yet property prices are still extremely affordable. Leeds’ rising profile means that house-price growth is really a matter of “when” rather than “if” so property investors should act quickly to make the most of this (possibly very brief) window of opportunity.

Sheffield

Two universities and one of the fastest-growing economies in the UK mean that the long-term decline in Sheffield’s population has now been reversed and the city’s revival is well underway.

Rather like Nottingham, Sheffield has long since ceased to be a “hidden gem” and so affordability is not as good as it is in Newcastle and Leeds, but it is still massively better than the south of England, which means property investors should be very satisfied with their returns.

Manchester

Even though Manchester has seen massive growth over recent years, there are still bargains to be had, especially for investors who are prepared to look at the Greater Manchester area. Bolton, in particular, stands out thanks to the improvements to the Manchester to Preston railway line.

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