Given its long list of merits, Nottingham could be a dream come true for investors interested in student accommodation.
In this post, we’ll break down why investors should consider Nottingham student properties for their portfolios. We’ll also go over the types of student accommodation on offer before pointing you towards the best areas to invest in.
Why invest in student accommodation in Nottingham
There’s a massive student population
As the home to two of the UK’s largest universities, Nottingham is regarded as one of the UK’s foremost ‘university towns’. Together the University of Nottingham and Nottingham Trent University have a combined student population exceeding 60,000. This accounts for between 15-20% of the city’s total population. Students are attracted to these universities not only for their academic excellence but also for Nottingham’s acclaimed social scene and low cost of living.
The University of Nottingham has always been a mainstay in the upper echelons of the UK university rankings. It almost always ranks in the top 100 world rankings too. As such, enrolment here is highly sought after. And not only by British students. Due to the university’s strong employability, global ties and international campuses in China and Malaysia, it’s also a top choice for foreign students.
Nottingham Trent University continues to climb up the ladders and is now widely regarded as a top UK university for student satisfaction. It was recently voted The Times and The Sunday Times Modern University of the Year 2023, and it ranks 3rd for offer acceptance. Its popularity is boosted by its proximity to Nottingham’s vibrant city centre which continues to undergo regeneration and has a world-class public transport system and excellent amenities.
What does this all mean for landlords? Given the excellent standing of both universities, as a landlord you can be confident there will be a constant influx of students year after year. Following students’ first academic year, most move out of university halls and begin searching for private accommodation. This is where the massive demand comes from.
In fact, demand is so high that there isn’t enough accommodation on the market for every student. The Nottingham City Council says there’s a shortfall of 5,500 student beds.
Due to this incredible demand, and the low dropout rates at both universities, property vacancy rates are extremely low.
With both universities declaring their intention to continue expanding and enrolling more students, the need for student housing isn’t going away any time soon. For landlords, it’s a perfect time to step in and invest in either student houses or purpose-built accommodation.
An underrated bonus for student property investors is the fact that rent is secured against student loans/grants and guarantor agreements.
House prices are lower than you might expect
While house prices have increased sharply throughout the UK over the last 5 years, Nottingham still boasts lower-than-average prices.
According to HM Land Registry data, the average price paid for houses in Nottingham in the last year was £198,080. The price paid for properties in England was much higher, on average £342,297.
Nottingham can clearly provide terrific value for investors. But how does it compare to other popular student cities? Let’s take a look at the average price paid for properties in Manchester, Newcastle, Leeds, and Sheffield, four cities with two or more universities. It might surprise you how much cheaper Nottingham is in comparison.
- Manchester: £236,489
- Newcastle: £211,659
- Leeds: £251,404
- Sheffield: £225,560
Fantastic rental yields and capital growth potential
So, there’s an endless demand for student properties and lower-than-average house prices in Nottingham. But what sort of returns can landlords expect?
Here is where Nottingham could really surprise you as a place to invest in student property. As you know, the two ways to profit from investment properties are rental yields and capital growth. As it turns out, Nottingham is a top performer in both these areas.
When it comes to rental yields, Nottingham is a show-stopper. It’s ranked as the UK’s 7th best town or city for rental yields in Track Capital’s 2023 report. In England, it’s the 4th best town or city. Nottingham beats out all the previously mentioned university towns as well as Liverpool, which has long been the darling of property investors. The average rental yield for Nottingham stands at 5.94%. One postcode in particular is the UK’s 5th best for rental yields. But we’ll get into that when we go over the best areas to invest in student accommodation in Nottingham.
Capital growth potential is another factor that investors must consider. You’ll be pleased to discover that Nottingham is a strong performer here too. UK Land Registry data shows that the average price paid for a property in Nottingham has increased by an average of 5.2% each year since 2012. By 2025, the average Nottingham property will sell for £242,506 if this trend continues. If you play the long game, you’re likely to see excellent capital growth appreciation as the universities continue to expand and Nottingham’s bold regeneration plans come to fruition.
Where are the best places to invest in student accommodation in Nottingham?
Before we take a look at the two best places to invest in student accommodation in Nottingham, here’s an overview of the types of property you have to choose from.
The two main options for investors in student properties are purpose-built student accommodation (PBSAs) or student houses with multiple occupants (HMOs). Each comes with its own set of benefits and challenges.
For instance, student HMOs provide higher rental yields on average but there’s tough competition from other investors.
PBSAs are a great option for those looking for a hands-off investment and easy passive income. But PBSAs generally cannot be bought with mortgages and can be expensive for investors unable to pay the upfront cost – the exception being off-plan property investment which has a lower entry point.
In Nottingham, the demand for PBSAs and student HMOs is about the same. Some students like traditional HMOs because they want to share a house with their friends. Others prefer PBSAs for their modern decor and facilities. Notably, PBSAs are especially popular with Nottingham’s international student population.
Investors can find great opportunities for rental income and capital growth with both these property types. As always, financial consideration, strategising, and research of the market and regulations are essential before investing.
Remember the Nottingham postcode that’s the 5th best in the UK for rental yields? You guessed it, it’s NG7.
Lenton, in particular, is at the top of the list for University of Nottingham students as its thought of as the place to be for socialising and good housing. According to Rightmove, properties in Lenton sold for an average of £271,159 over the last year. It may not be the most affordable area in Nottingham, but the high-quality housing here can produce excellent rental income for landlords.
Lenton is an especially competitive place to buy property, so don’t overlook Dunkirk and Arboretum as alternatives in NG7. These two areas are also highly popular with students.
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NG1 is another promising area to invest in properties. This postcode area covers the city centre, which is popular with Nottingham Trent University students. Rental yields have always been strong in this area. Such that in 2022, it was included in the top 10 best postcodes for rental yields by Track Capital.
Right move data shows that city centre properties sold for £239,969 on average, making it more affordable than the likes of Lenton. Seeing that Nottingham’s student accommodation is massively undersupplied, developers are scrambling for plots of land to increase the number of purpose-built student accommodations in the city centre. This is being carried out at the behest of the Nottingham City Council which is hoping to prevent a student housing crisis. With demands this strong, now could be a great time to diversify your portfolio with this type of property investment.