| University Town |
Average Property Price (Terrace)^3 |
Capital Appreciation over three years^4 |
Saving on rent over three years^5 |
TOTAL PROFIT^1 |
| Edinburgh |
£311,015 |
£28,839 |
£2,688 |
£31,527 |
| London |
£295,818 |
£27,430 |
£1,915 |
£29,346 |
| St Andrews |
£226,790 |
£21,030 |
£1,960 |
£22,990 |
| Bath |
£201,421 |
£18,677 |
£1,258 |
£19,935 |
| York |
£161,155 |
£14,943 |
£1,006 |
£15,949 |
| Bristol |
£159,045 |
£14,748 |
£993 |
£15,740 |
| Warwick |
£133,287 |
£12,359 |
£832 |
£13,191 |
| Nottingham |
£78,317 |
£7,262 |
£1,467 |
£8,729 |
| Manchester |
£77,258 |
£7,164 |
-£6 |
£7,158 |
| Durham |
£69,773 |
£6,470 |
-£5 |
£6,465 |
For example:
If a three bedroom terraced property was purchased for £311,015 in Edinburgh with a three year fixed rate interest-only buy-to-let mortgage at 4.99 and two bedrooms were rented out, a parent could save £2,688 in rental payments while making £28,839 in capital appreciation. |
Parent’s whose children choose to study in Edinburgh can make the most profit if they choose to buy and rent out two of the three bedrooms (£31,527). However, parents of students in London (£29,346), St Andrews (£22,990) and Bath (£19,935) can also expect to see healthy profits of over £19,000 in just three years. Even in Durham, which rates as the lowest in the table, parents can still make a £6,465 profit.
Chart one: property prices and projected profit over three years
Market on the up
Year on year, the profits to be made from student property have increased with house prices, still making this a very attractive investment for parents:
• Parents in London buying a student house in 2007 are set to make substantially more profit than in 2006 (£29,346 compared to £18,888).
• The return for student properties in Bath has risen by £6,273 from an estimated £13,662 in 2006 to £19,935 in 2007.
• Bristol is also expected to have higher returns in 2007, up £5,748 from £10,262 in 2006 to £15,740.
Lee Grandin, Managing Director of Landlord Mortgages, comments:
“With stiff competition for rented accommodation in university towns, investors are faced with a captive audience, meaning that this type of buy-to-let investment can prove highly profitable. Rather than fork out to line the pockets of other canny landlords, buying for your child’s higher education has three fold benefits; potentially making a handsome profit, security in the knowledge your child is living in good accommodation and choice over your child’s flat mates.
“With property prices steadily rising, particularly in Scotland and London, there is clear scope for a high return on investment. Rental yields remain steady so student property will definitely make a solid asset and one well worth considering before your child flies the nest to start their higher education.”
Foot Notes:
1 = Capital appreciation and total rent saving combined.
2= Top Ten UK Universities– Sunday Times May 2007.
(1. London (London School of Economics, Imperial College London, University College London, Kings’s College London) 2. University of Warwick 3. University of York 4. Durham University 5. University of Bristol 6. University of St Andrews 7. University of Bath 8. University of Nottingham 9. University of Edinburgh 10. University of Manchester.)
3 = Property prices sourced from the Land Registry based on a three bed terraced house
4 = House price predictions are based on current estimates (3% per year).
5 = The mortgage repayments are based on a best buy buy-to-let interest-only mortgage at 4.99% for a three year fixed rate. The rent obtainable for the two spare bedrooms is then factored in and taken off the mortgage payments. Finally, the amount the parent would need to pay to rent a single bedroom for their child is compared to the amount of the mortgage, they need to pay and a saving determined.
