People looking buy a property for investment purposes could miss out on high return by not renting their properties to students, new research has indicated.

Paragon Group, a lender which specialises in the buy-to-let sector, said that investors who let property to students achieved rental yields 25 per cent better than landlords who let to a general market, scooping a yield of seven per cent compared to the 5.6 per cent netted by their contemporaries who let to a wider audience.

Nigel Terrington, chief executive of Paragon Group, said: "Strong tenant demand in the student market is driving yields in that sector. If landlords select the right type of property in the right location, the returns from the student market can be extremely healthy."

With the number of properties available said to be failing to keep pace with an increasing number of students, Mr Terrington added that investors had a pool of tenants ready to compete for a prime property.

"Most student landlords will have let their property for the following academic year by early spring due to the strong level of tenant demand and the competition between students for the better quality properties is fierce. This gives pricing power to the landlord," he concluded.