Commonwealth _ Investors seeking to enter the HMO (House in Multiple Occupation) market in London face considerable challenges as owners of HMOs in the capital rarely put their properties up for sale. Research conducted by lender Octane Capital has revealed that while London has the highest number of HMOs in England, a mere fraction of them is listed for sale. The limited availability of HMOs (House in Multiple Occupation) for sale has driven prospective investors to explore an alternative approach to converting residential properties into HMOs. This strategic shift has gained traction due to the scarcity of HMOs available for purchase in the highly competitive market. London, as the UK’s capital city, stands at the forefront with the highest number of HMOs in England. This reflects the robust demand within London’s rental market. With around 83,900 HMOs, London accounts for a substantial percentage of 38.7% of the entire national HMO inventory, underscoring its dominant position in the UK’s HMO market.
The heightened demand for HMOs in London underscores the appeal of this type of investment, pushing investors to consider conversion opportunities as a means to establish a presence in this dynamic and competitive market. However, the limited number of HMOs actually available for sale is striking, with just 164 currently listed on the market, representing a mere 0.2% of the total HMOs in London. This has created a situation where investors are increasingly compelled to explore other regions to find HMOs available for purchase. Jonathan Samuels, Chief Executive of Octane Capital, highlighted the challenges in London, stating, “London is by far the toughest region when it comes to finding a ready-made HMO for sale. Yes, it may have a hefty supply of stock, but owners of HMOs are seemingly in it for the long haul in the capital and are showing a lack of appetite to sell.” For investors seeking HMO opportunities, the Southeast provides a more promising landscape, with 654 listings, the highest in any region, accounting for 19.4% of the total HMOs currently available for sale in the country.
The North West of England emerges as a significant player in the HMO (House in Multiple Occupations) market, with 507 HMOs currently available for sale. These properties constitute a substantial portion of the national stock for sale, accounting for 15.1% of HMOs on the market across the country. This prevalence indicates that investors looking for HMO opportunities find the North West to be a promising region for investment and expansion within this niche. Following the North West’s strong presence, the East Midlands takes the third position in terms of HMO availability, with 448 HMOs currently listed for sale. Investors eyeing the East Midlands can explore numerous opportunities within this market to potentially secure higher returns on their investments. Properties divided into multiple units hold particular appeal for investors seeking robust returns. Previous research conducted by Octane Capital underscores the financial attractiveness of HMOs accommodating four tenants. These properties typically yield investors a monthly rent of £593 per room, translating to a total of £2,372 per month. These substantial returns result in impressive average yields of 8.1%. In contrast, standard four- The substantial disparity in returns, with HMOs averaging an impressive 8.1% compared to the 4.4% yield of standard four-bedroom properties, underscores the increasingly attractive prospect of HMO investments. This higher return on investment is a compelling factor drawing investors to explore opportunities within the HMO market.
