Almas Uddin
Founder and Mortgage Advisor
29 Nov 2022
While London is, perhaps unsurprisingly, the location where a huge 25% of UK HMOs are based, studies reveal that the most lucrative investment opportunity may be slightly further afield in the South East.
London is home to 24% of properties categorised as HMOs. Still, the South East and the East Midlands present the largest potential for property investors when analysing market appetite and demand.
Hotspots for UK HMOs
We researched the spread of HMOs across the UK, the volumes of available investments, and the metrics we're seeing to help investors evaluate the opportunities currently on the housing market.
The statistics show that:
- There are slightly fewer than 56,000 properties categorised as HMOs in England.
- Of those, 13,528 are based in London, representing 24% of housing stock.
- 10,737 HMOs are registered in the East Midlands or 19% of the total.
HMO properties in the South West, South East and West Midlands comprise 16%, 12% and 10% of the HMO market, respectively - a large proportion of the sector.
Shared properties are less popular in northern regions, with the North East a base for only 1% of all HMOs across the country.
Of course, HMOs attract specific client demographics, such as students or professionals looking for cost-efficient housing during the working week. But, understanding trends can be invaluable for investors or those considering whether their property would return a good profit if converted into a licensed HMO.
2022 HMO Investment Opportunities
Interested buyers browsing the current market have 886 properties to choose from, although there is a far greater concentration in the South East, showing sure signs of being a lucrative area of HMO investment.
In a like-for-like comparison:
- 210 of all HMO properties listed for sale are in the South East - 24% of all listings.
- The East Midlands has 125 investment opportunities, making up 14% of the market.
- North West, Yorkshire and the Humber, South West, and West Midlands HMO listings are also worth further inspection, comprising 13%, 12%, and a dual ranked 11% of the market overall.
While these figures are big-picture overviews, the message is clear. There are certain regions within the UK where HMO accommodation is in high demand and outperforms other locations many times over.
Some trends may be driven by living costs and professionals looking for efficiencies in selling second properties and renting close to central work hubs and university locations.
However, trends so significant as to capture a quarter of market share are more likely to have longevity and provide a useful indicator for HMO investors.
Professional HMO Purchase Advice
London will always be a stronghold for multi-tenancy and affordable housing. There isn't any question that this will not change in the capital, where average property purchase prices are beyond the means of many.
Investment choice is abundant, and housing stock levels are high.
The decision for investors is whether they want to buy into the consistent consumer demand for HMO rental properties or decide to diversify into other regions with substantial growth.
While the South East seems a strong contender as an investment opportunity, the factor in favour of London is that domestic and international tenants provide a compelling market, with vacant periods few and far between.
That said, investors should evaluate all potential options and be cautious about assuming ongoing wage growth before making any long-term financial decisions.
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