Buy-to-let landlords squeezed by recent tax changes are being advised they may find better returns by targeting northern towns and cities with sizeable student populations.

University towns and cities where housing is cheap, such as Liverpool and Middlesbrough, are providing rental yields up to seven times higher than in London, a study by credit specialists Totally Money has found. The effect of the three per cent stamp duty surcharge is also mitigated by buying cheaper property. Its report compared average rents to house prices to highlight the most profitable places for buy-to-let and named a pair of postcodes (L6 and L7) close to two of Liverpool’s three universities as a hotspot for property investment – with rental yields of almost 12 per cent.

Average monthly rents in the two postcodes were £1,162 and £1,046, according to the research, whereas house prices were £118,225 and £109,940, respectively. Middlesbrough’s TS1 town centre postcode, home to Teeside University, took third place, with an average rental yield of 10.94 per cent. The area has modest average rents of £595 per month but a low average asking house price of just over £65,000, makes it one of the most affordable spots to buy into. Landlords whose hearts are set on a buy-to-let investment in the capital should look to east London for the best returns. East Ham, Plaistow, Manor Park, Chingford, Stratford, and Poplar all rank in the top 10 London postcodes for rental profits.

At the other end of the spectrum, the worst performing area outside of London was Bournemouth’s BH14, which has average rental yields of 1.68 per cent. Crewe’s CW12 comes next, with 1.74 per cent. All postcodes in the 25 highest yielding areas have average house prices of below £300,000, suggesting that more affordable house prices generate better rental yields than hoping that costly properties will rent for more. Totally Money’s Joe Gardiner said: ‘With students flocking to university cities year after year and looking for a place to live, it’s no surprise the student market is a dependable one for landlords. Since so many students are looking for accommodation, landlords may use this as an opportunity to drum up competition between them.’