Why is the student market in Leeds so strong?

 

1hr and 59mins is the time it takes from Leeds Train Station to London Kings Cross.  Roll the clock back 20 years, and to the London investor Leeds was just another provincial city, north of Watford Gap and a place where nobody visited let alone invested. However, since the turn of the Millennium, property investors from the South have slowly but surely cast their eyes beyond the M25 and identified new parts of the UK where they can get yields that are over twice, if not three times higher than that can be achieved in London. 

Coupled with competition from local landlords, the result over the last few years has been an increasingly buoyant student property market in Leeds, particularly in the last six months and particularly in the prime locations of central Headingley and Hyde Park as demand has outstripped supply.  It has not been unusual in the last few months for properties in these areas to be sold within days of coming on the market for amounts at or above asking price.

This may seem surprising in view of the new Tory government’s unexpected attack on the private landlord and the general Buy to Let sector.  You would have expected the reduction of tax relief on mortgage interest for higher rate income tax payers, coupled with the abolition of the annual 10% wear and tear allowance and higher rates of stamp duty for BTL properties would have dampening demand, but evidence on the ground would suggest quite the contrary with the student property market in Leeds now stronger than ever.  The obvious question is why?

Well, when looking for the best city for your student Buy to Let, it is important to look at two things ... total student numbers and what proportion of students are in the private rented sector.  Leeds scores well on both counts, it is third only to London and Manchester in terms of total numbers and ranks fourth behind Glasgow, Brighton and Southampton in terms of the proportion of students renting in the private rented sector.

 

In real numbers that’s just over 60,000 students in total with around 55% living in the private rental sector, with 30% in halls and 15% living at home.  As such, the city has a healthy target market for those wanting to become student landlords or grow their portfolio.

If you couple this with the fact that Leeds is one of the few remaining university cities in the UK which still enjoys a 52 week rental year, and that even with prices increasing at their current rate you can still expect between 9 and 10% return on your investment, then we have a very strong argument for investment in the student market in the city.

And whilst Leeds hasn’t seen the levels of capital growth witnessed in London and the South East, across the general market property values in Leeds have risen by 122% since January 2000.  I would suggest that in the student market values have risen by more as they not only mirror the general market, but are also closely linked to rents which in broad terms have increased by 2-3% per annum.  This coupled with the somewhat frenzied activity in the market since the summer as demand seems to be completely outstripping the available supply, would suggest that capital growth remains strong.

To go slightly off tangent, it is important to recognise the impact of international students on Leeds.  One of the main themes of the General Election was for tighter migration targets. Of the 58,000 students in Leeds, 6,000 of them are international students.  This is important, as approximately just over a third of migrants who come to the UK do so for formal study and it is essential that we recognise the important role they play in university funding and the demand for student properties.

Having said all of the above, landlords new to the market must realise that they can’t just buy ‘any old property’ in Headingley or Hyde Park and expect it to be the answer to their buy to let dreams.  It is important to buy in the right area, obviously at the right price, maintain the property to a high spec, and perhaps most importantly not get greedy by over populating the property.  After all there is still a surplus of student houses in Leeds, so if you don’t follow these principals then you may be left with an empty student house or apartment come next October.

Many landlords, some who use us to manage their properties, or who manage their own properties, and even landlords who use other agents often email me or pick up the phone for thoughts and opinions on what (or as importantly, what not) to buy.  At Springwell we don’t sell houses, so can give impartial and thoughtful advice and opinion, even if sometimes it might not be what you want to hear.


Feel free to give me a call but in the meantime, if you’re interested in my ongoing thoughts on the market, keep visiting the blog to see what properties I think make a good investment.