The market for Houses of Multiple Occupation (HMO) looks set to grow as the fallout from the Covid-19 pandemic starts to settle. It’s good news for landlords looking to expand or diversify their buy-to-let portfolios.
- People now are looking for properties offering flexible, affordable and sociable living.
- The Nationwide house price index has reported UK house prices rose on average over 10% over the year to May 2021. This has put increased financial pressure on first-time buyers’ ability to buy and many feel home ownership is currently beyond them.
- Young people are less inclined, currently, to commit to such a financial investment when uncertainty still surrounds the economy and their careers.
- The fact many young people have either been living alone or with parents for the last 12 months or so means their desire for a communal lifestyle is now more attractive than ever.
- With things like graduate schemes restarting, young people beginning their careers in a new location are searching out HMO properties in which to live.
At the same time, HMOs are increasingly appealing to investors particularly because of their potential for higher-than-average rental yields when compared to other property types.
Other factors such as the growth in competition among HMO mortgage lenders, as they recognise the commercial attractions of this sector, has led to better HMO mortgage rates being available which in turn opens up opportunities for potential investors.
This market environment presents a number of opportunities for landlords looking to diversify their portfolios.
What opportunities are there for landlords?
Overall, the property market has been buoyant during the last six months and according to a recent survey by Deposit Protection Service (DPS) and Zephyr Homeloans the ‘opportunity to buy at a discount’ is driving many landlords to expand their portfolio.
The survey revealed that 34% said they had either recently purchased another buy-to-let property or intended to buy one within the next nine months.
With over 17,000 stores closing on Britain’s high streets, the government and local authorities are looking for ways to revive town centres across the country.
From August, planning restrictions will be relaxed and developers will find it much easier to obtain permission to convert retail space into housing.
This may well boost the HMO market, offering more potential for landlords and tenants at the same time as breathing new life into our towns.
Growing demand to move away from big city living
A recent survey from the DPS showed that the pandemic has triggered a desire for many people to move away from big cities and to relocate to more provincial towns and villages.
This has a two-fold impact. The first is that you may be able to secure a city dwelling suitable for HMO living at a good price as demand slackens and you can look to invest in properties outside the cities to cater for those looking to relocate.
The rise of shared living
There are three key drivers for the anticipated rise in demand for shared living:
- Affordability – renting an individual room in a house is cheaper than paying for a whole house.
- Flexibility – we live in a very mobile society and many people will move around the country for work and won’t want to be tied down by a property.
- Sociability – particularly since the pandemic, people want to connect and communicate with others and shared living is a great way to satisfy this need.
Working from home
One key aspect of most people’s working life that has changed as a result of Covid-19 is the rise of working from home (WFH).
Smart landlords are now adapting their properties to better accommodate tenants’ requirements for a space to work in.
If you can provide your tenants with good WFH facilities then you’re likely to make your properties more attractive and charge a higher rent.
Vincent Burch is mortgage director of Vincent Burch Mortgage Services
