NEW: Student accommodation now most popular investment among landlords

Universities are a key driver of BTL activity and lending as more landlords choose to invest in areas with large student populations.

Paragon Bank's lending data for the 12 months to the end of June reveals that Cardiff’s CF24 postcode attracted the highest level of buy-to-let investment, where four in 10 properties are privately rented with average yields of 8.9%.

More than a quarter (27%) of residents are students, with Cardiff University, Cardiff Metropolitan University and the University of South Wales all within easy reach, while landlords are also investing in the area to cater to the large numbers of NHS staff working at nearby hospitals.

The PL4 postcode in Plymouth saw the second highest levels of investment by buy-to-let landlords during the period. Like Cardiff, Plymouth has three universities – Arts University Plymouth, Plymouth Marjon University and the University of Plymouth – providing landlords with a reliable stream of term-time tenants, as well as key workers employed at the Mount Gould Hospital.

High returns

Rental yields are another draw for landlords to PL4, as they can generate annual average returns of 10.2%, the highest of all hotspots on the list.

LE11 in Loughborough, NG7 in Nottingham, Stoke-on-Trent’s ST4, Birmingham’s B29 and M14 in Manchester also featured among Paragon’s top investment locations.

Managing director Louisa Sedgwick (pictured) says its data shows that landlords typically buy properties in larger town or cities and within relatively close proximity to universities or large local employers, benefitting from strong and stable demand.

Terraced houses were the property type most often bought by landlords in each of the hotspot locations.

“This support of higher education and healthcare, in addition to important sectors such as software, manufacturing and logistics, highlights the often-overlooked contribution of the PRS to the UK economy,” she adds.