Paragon Bank found that Cardiff’s CF24 postcode saw the highest buy-to-let (BTL) investment in the 12 months to the end of June, moving up from fifth place last year.
The data showed 42% of properties in CF24 are privately rented, with average yields at 8.9%.
Over a quarter of CF24 residents are students, close to Cardiff University, Cardiff Metropolitan University and the University of South Wales.
PL4 in Plymouth was a new entry in second place for BTL investment.
Plymouth has three universities and Mount Gould Hospital, giving landlords a consistent tenant base.
Average yields in PL4 were 10.2%, the highest on the list.
The average property price was £216,000, which is lower than the England average.
LE11 in Loughborough took third place, up from eighth, with annual yields of 8.0%.
The area draws demand from students at Loughborough University, the town’s largest employer, and local NHS staff at Loughborough Hospital.
NG7 in Nottingham stayed in fourth.
Other repeat entries included Stoke-on-Trent’s ST4, Birmingham’s B29 and M14 in Manchester, which dropped from top spot last year to eighth.
Other top postcodes were GL1 in Gloucester, HU5 in Hull, LS6 in Leeds, and all achieved strong yields.
Terraced houses were the most common property type bought in every hotspot.
Louisa Sedgwick, managing director at Paragon Bank, said: “Looking at our lending data covering the 12 months to the end of June, we can see similarities in landlord investment strategies.
“Our data also shows that landlords typically purchase properties in larger town or cities and within relatively close proximity to universities or large local employers, benefitting from strong and stable demand.
“This support of higher education and healthcare, in addition to important sectors such as software, manufacturing and logistics, highlights the often-overlooked contribution of the PRS to the UK economy.”
Sedgwick added: “Terraced houses were the property type most often bought by landlords in each of the hotspot locations.
“Smaller terraces are often more affordable than other property types, making them a good place to start for newer landlords or those looking to expand their portfolios.
“At the other end of the scale, HMOs are often classified as terraced properties but benefit from typically higher yields owing to the capacity for multiple tenancies.”
