HMO property market evolving according to new report

 

One of the most important and exciting new sectors in the UK property market, Housing of Multiple Occupancy (HMO), is evolving into a mainstream property investment model, according to a new report from specialist commercial lender Shawbrook Bank.

A combination of financial pressures for those who have yet to get on the housing ladder, plus a shift in how people want to live in the early stages of their professional careers mean this type of property has grown hugely in popularity for renters. The report states that ‘…with a generation of young professionals focused more on renting, due in part to house prices but also due to the desirability of higher levels of disposable income, shared accommodation is highly appealing for this demographic for both financial and social reasons.’

Karen Bennett from Shawbrook Bank says that “landlords talk about creating a community of young professionals who actually want to co-habitate because it’s more sociable and enjoyable.”

The report quotes a Spareroom.co.uk survey of 10,000 tenants in shared accommodation which shows more than 70 per cent are aged under 30 years, while more than half are not in a relationship.

The market for HMOs has been increasingly popular among landlords too, with yields beating other types of buy-to-let investments. David Whittaker of Mortgages for Business said, “Our Complex Buy-to-Let Index has been tracking gross rental yields across a variety of property types for the

past five years. In that time HMOs have consistently outperformed both vanilla buy-to-lets and blocks of flats owned on a single freehold title yielding an average of 10% per annum compared to 6% and 7% respectively.”

Three types of HMO landlord are identified – the ‘accidental’ HMO landlord who rents out a spare room in their home, regular buy-to-let landlords who have bought a large property and then decided to it is well-suited to HMO letting, and ‘active’ HMO investors who look specifically for properties suitable for HMO letting, and who are prepared to reconfigure whole properties if necessary.

https://www.buyassociation.co.uk/2016/09/09/rics-report-suggests-post-brexit-fears-may-overestimated/

The report also highlights that growing competition among HMO landlord is forcing many to go the extra mile in order to set themselves apart from other HMOs on the market. As Emma Cox from Shawbrook Bank highlights, “These enhancements take the shape of very high quality finishes, wireless access, flat screen TVs in communal areas and entrance ways etc – anything that gives them an edge in attracting the desired tenant profile”.

Among the future challenges the market for HMO may face, the report highlights the risk of oversupply in some areas as more landlords attempt to access the higher yields on offer, suggesting that in some areas HMOs are already being returned to single let status by investors unable to fill the full HMO capacity. Local and national government are also seen as a threat to investor profits. As Jim Moulton from Shawbrook Bank has highlighted, “One of the biggest is potential council tax changes in the future. Some of the councils are quite switched on about this and they’re implementing it. They are making changes such as council tax per room rather than for the dwelling as a whole. This will take a huge dent out of landlord’s profits”.

Local authorities are also looking into licensing schemes for HMOs in some areas, which is another thing potential HMO investors need to check.
Taking all of the potential challenges into account, the report concludes: ‘Demand for this asset class is on a consistent upward trend… With the supply/demand challenges across the UK housing landscape and the resulting importance of the Private Rented Sector, HMO property is and will remain an essential and affordable source.’

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

HMO property market evolving according to new report

HMO property market evolving according to new report

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.