Scotland’s university cities experience highest yields for landlords
A study by property site Zoopla found that four out of five of the top most profitable locations for landlords can be found north of the border.
Campaign group PRS 4 Scotland warned that the figures mask what is a “quite fragile” market in reality.
Zoopla looked at where investors can get the best return from buying up properties near universities and letting them out to students.
Edinburgh was 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.
Only one English university town - Coventry - made it into the top five, coming second.
The study said Edinburgh offers buy-to-let landlords an average rental yield of 6.11 per cent. 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.
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.”
Dr John Boyle, for PRS 4 Scotland and economist at Rettie & Co, said: “The numbers quoted by Zoopla highlighting rental yields across the UK might encourage those looking to introduce rent controls in Scotland, but in reality the picture is quite fragile.
“We need a continuous supply of high quality rental accommodation to meet growing student demand, and while returns are good for those who have invested in buy-to-let in our university cities, investors and lenders perceive a far higher risk here than elsewhere in the UK.
“The prospect of rent controls without any balance in the form of tax or planning regulations to encourage investment is a huge cause for concern. Add to this the proposed new tenancy agreement, which will make a landlord unable to repossess a property at the end of a contract, and suddenly the reason to invest becomes even less compelling.
“We have a serious housing shortage in Scotland, and a strong, modern and sustainable rental sector has to be part of the solution. Taking figures in isolation is always dangerous and the Scottish Government should be encouraged to consider all available data and use the policy tools at its disposal to create a private rented sector that addresses the needs of investors as well as those of tenants.”