Postcodes with significant student populations are leading the way in buy-to-let investment activity for 2025, as landlords seek areas that offer robust rental yields alongside reliable tenant demand. Lending data from Paragon Bank highlights key university towns and cities as hotspots for buy-to-let purchases, reflecting a strategic focus on markets underpinned by young renters.

Student areas dominate buy-to-let hotspots

According to Paragon Bank’s lending data for completions between 1 January and 31 December 2024, Cardiff’s CF24, Nottingham’s NG7, and Manchester’s M14 postcodes top the list of buy-to-let hotspots. These areas are characterised by large university populations and well-established lettings markets, making them attractive to landlords targeting consistent rental income.

Other locations such as Loughborough’s LE11 and Gloucester’s GL1 also feature prominently, supported by demand from students and younger tenants. This trend underscores the importance of demographic factors in shaping landlord investment decisions, with universities acting as a key driver of rental demand.

Landlords targeting strong returns

Louisa Sedgwick, managing director of mortgages at Paragon Bank, commented on the data: “This year’s rankings show a clear and enduring trend; the strongest buy to let markets are those supported by large student populations and a solid flow of young renters, supplemented by other sources of tenant demand, such as hospitals or employment centres.”

She added, “Landlords are increasingly targeting locations where tenant demand is predictable and yields remain consistently high.” Sedgwick further noted that investor strategy has become more focused and data-driven, with hotspots like Cardiff, Nottingham, Manchester, and Leeds exemplifying markets that continue to deliver strong returns despite wider economic challenges.

Preference for terraced homes

Paragon Bank’s analysis reveals that terraced houses remain the most common type of property purchased within these buy-to-let hotspots. Their suitability for shared living arrangements and relatively lower price points make them particularly appealing to landlords catering to student and young professional tenants.

In terms of rental yields, Plymouth’s PL4 postcode leads the top 10 with a yield of 9.78%, followed closely by Gloucester’s GL1 at 9.66%, and Hull’s HU5 at 9.01%. Notably, seven out of the ten locations recorded yields above 8%, indicating strong income potential across these markets.

Only Croydon’s CR0 postcode appears in the hotspot list without a university presence, offering yields of 5.93%. This area benefits from commuter demand and regeneration projects, with converted flats representing a significant share of buy-to-let purchases.

What this means for landlords

The data highlights the continued importance of targeting buy-to-let investments in areas with stable, predictable tenant demand, particularly from students and young renters. Landlords focusing on university towns can expect consistent occupancy and strong rental yields, especially when investing in terraced housing suited to shared living.

Moreover, the resilience of these markets amid economic uncertainty suggests that landlords adopting a data-driven approach to selecting locations may be better positioned to achieve sustainable returns. Areas benefiting from additional demand drivers, such as hospitals or employment centres, also offer diversification opportunities within the rental sector.

Source: Based on reporting from Property118

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