Why to Avoid Buying in University Cities

Despite the common belief that university cities offer high rental yields, the expert warns against investing there for several reasons:

• High Turnover and Voids: Student tenants typically sign short-term, academic-year leases. This leads to frequent tenant turnover and potential void periods over the summer, which can significantly reduce annual income.
• Intensive Management: Student properties, particularly houses in multiple occupation (HMOs), often experience higher wear and tear and require more intensive management. The frequent need for cleaning, repairs, and finding new tenants makes it a more hands-on and time-consuming investment.
• Regulatory Complexity: Student rentals are often subject to stricter regulations, including specific HMO licensing requirements. Complying with these rules can be costly and add to the administrative burden.
• Competition: The market is increasingly saturated with purpose-built student accommodation (PBSA) developments. These modern, professionally managed blocks offer students amenities that private landlords may struggle to compete with, leading to oversupply in some areas.

Why Landlords are Selling Up

According to a property expert’s analysis, approximately one-fifth of landlords are selling their properties due to a combination of economic pressures and legislative changes. The market is shifting from a casual investment to a more demanding, professional business.

• Financial Squeeze: Higher interest rates on mortgages are making it difficult for landlords to maintain profitability, especially those with smaller portfolios. Recent tax changes, which limit the ability to deduct mortgage interest from rental income, have further tightened margins.
• Regulatory Burden: The impending Renters’ Rights Bill, with its plan to abolish Section 21 “no-fault” evictions, is a major concern. Landlords are worried this will make it harder and more costly to manage their properties, particularly in cases of non-paying or difficult tenants.
• Exit Strategy: Many landlords are selling while they can still use a Section 21 notice to regain control of their property, which gives them more flexibility and a cleaner sale process.