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Global Market Insight 24 August 2016

The UKs top university cities to invest in property

Edinburgh, Bristol and Brighton have been revealed as the best university cities to invest in...

Chestertons has ranked the UK's top university cities to reveal the best prospects for those looking to invest in student accommodation – whether they be landlords, students and their families or recent graduates.

Taking into account a range of factors including average cost, rent charges and recent growth in house prices, the cities have each been given a score out of ten. Edinburgh, Bristol and Brighton came out as the best university cities to invest in property, with Oxford and Cambridge further down the list, in fifth and equal seventh respectively.

Chestertons researchers also ranked 12 of London's best known institutions using the same criteria, generating a separate league table for the capital topped by LSE, which has its main campus in Islington, with Queen Mary University in the east-end borough of Tower Hamlets and Goldsmith's in Lewisham second and third respectively.

The studies will hopefully be of interest to students preparing to head off to university now the A-level results have been released, as well as their relatives who may be considering helping finance a property purchase to save on rent and to help them get a foot on the property ladder, while also maximising income from renting out spare rooms to friends and course-mates.

Edinburgh, Bristol and Brighton have been revealed as the best university cities to invest in, according to the research that analysed the house prices, rents and growth in local housing markets for a range of university spots around the country. By comparison, the Oxbridge universities didn't fare quite as well, while Aberystwyth, Liverpool and Lancaster came out as the least beneficial investments of the 36 ranked, owing to more affordable rents and slower recent house price growth.

Rather than just considering yields as many investment analysts do, Chestertons' researchers took into account a range of factors from house prices through to average graduate income, in order to find out where the best investments could be made. Average graduate income was used as a measure of a university's popularity, as well as an indication of how affordable students may expect to find taking over mortgage repayments once their studies are complete. And landlords hoping to retain tenants for a period after they graduate can be reassured they should be able to pay the rent.

Daniel Killick, manager of the Kew branch of Chestertons, says: "Student lets are generally seen as a great investment; there will always be a reliable level of demand and universities can often be really helpful in pointing students your way. Some locations, however, offer a better return than others. We were keen to get some deeper insights into the UK's student property market and understand where the most attractive prospects are – and the ones that are less likely to pay off."

Caspar Bell, Research Analyst at Chestertons, adds:

"Three or four years at a top university is an expensive business, with the costs of tuition fees alone typically amounting to tens of thousands of pounds over the course of an undergraduate degree. When you factor in the cost of living, especially in a city such as London, that figure could easily more than double.

"While it will not necessarily be applicable to every person about to embark on their degree studies, those with the means, perhaps with supportive family or a partner's help, should consider whether it isn't cost-effective to try and get a foot on the ladder as soon as they can, saving money on rent and being able to reap the benefits of capital growth over time and the additional income from letting out a spare room to a friend or fellow student. How great would it be to graduate from university as a ready-made homeowner? If the original students move on then there is always the option of keeping the property as a student let, or selling it to fund a house purchase somewhere else as circumstances dictate.

"Raising a deposit may be tricky for some but there are also a number of affordable housing options, Help to Buy savings products and shared ownership schemes that undergraduate investors could qualify for. With mortgages also exceptionally affordable at present, it really is worth considering buying a property to live in as opposed to renting.

"Our calculations may also prove helpful to investors looking to capitalise on the burgeoning student rental market, as it shows entry costs ranked against rental yields and is a useful guide as to likely demand from student tenants and price growth over time."