Confidence high in HMO rental sector

Confidence high in HMO rental sector

Confidence among landlords in the UK rental sector has been high for some time now, thanks to the favourable returns and high yields achievable across the buy-to-let market as a whole. New figures have shown that this is set to continue into 2015, with one type of property in particular likely to garner a lot of interest from investors. 

Homes in multiple occupation (HMOs), which are properties in which three or more tenants from more than one household live and share bathroom and kitchen facilities, are most popular with young professionals and students. These mostly form what has become known as generation rent - people who would rather rent a home than purchase one for the sake of convenience. 

The demand that has come from generation rent for properties of this type has seen the desire for investment rocket, and this has become the most popular asset class with landlords across the UK.

Platinum Property Partners' latest report showed that 43 per cent of landlords in general want to purchase more homes in the new year to add to their portfolios. 

However, when it comes to HMOs, the desire for investment is decidedly higher. Fifty-two per cent of those who have already purchased HMOs will be looking to grow their stock numbers in the next 12 months. 

Some 29 per cent will be looking to purchase at least two new properties for this particular arm of the private rented sector, while 14 per cent said they intend to buy three or more, such is their confidence that the market will perform well for them in the new year.

This high level of positivity doesn't seem to be misplaced either, with the latest predictions from Marsh & Parsons stating that the next 12 months are likely to see the rental market's value increase. According to the company, 2015 will experience rental growth in London property of up to ten per cent, compared to just between three and five per cent for house prices in the capital. 

Confidence among landlords also comes in spite of the fact that many are expecting next year to be the one in which the Bank of England raises the base interest rate. Even though this would make it harder for people to get a buy-to-let mortgage at a price that is affordable, landlords are still looking to get themselves a slice of the action. 
"A rise in interest rates is one of landlords’ main concerns for 2015, yet the majority don’t anticipate that these rises will be dramatic or unaffordable. As a result, our research reveals that the sector will continue to grow next year, with two in five planning to add to their portfolio despite a likely interest rate rise," said Steve Bolton, Platinum Property Partners' chairman. 

"Investors in HMOs show the greatest intention to increase their portfolios, which reflects the fact that HMOs and renting to working tenants such as young professionals delivers extremely attractive returns, and offers higher rental income compared to other buy to let options if done properly. This has cultivated robust confidence among those already reaping the fruits of this type of investment, and has sown the seeds for ambitious expansion in the sector next year," he added.