Investor demand for HMOs remains strong despite tightening planning rules with latest data showing shared housing deals attract the most interest but make up only a small proportion of available opportunities.
Figures from the Sourced Property App, which has more than 20,000 users, show HMO investments receive the highest number of views per listing, yet account for just 8% of all deals uploaded to the platform.
The data suggests investors are still chasing high-yield rental opportunities, even as planning restrictions and Article 4 directions make new HMO conversions harder to deliver.
The app, which publishes investment deals sourced by a nationwide network of more than 150 professional deal sourcers, says demand for HMOs remains driven by strong cashflow potential compared with standard buy-to-let.
ATTRACTIVE TO INVESTORS
Stephen Moss (main picture, inset), CEO and founder of Sourced, says: “The Sourced Property app was launched in 2021, with profitable property investment deals uploaded each day via a nationwide network of over 150 professional sourcers.
“This month our statistics focused on HMO property deals and revealed that although they received the highest ratio of views from investors, they accounted for just 8% of all property deals loaded to the app.
“HMOs remain attractive to investors because they combine relatively low-risk investment with high cash-flowing assets, often with 12%+ yields. In addition, permitted development via most councils has helped to facilitate conversion of C3 Residential Use Class into Class C4 HMOs of six beds or under.”
ARTICLE 4 AREAS
Moss adds that the HMO market is changing due to councils implementing Article 4 areas or seeking to expand existing Article 4 areas.
He says: “As an example, last year Article 4 was implemented throughout the entire borough of Wigan, resulting in all future HMO conversions of any size now requiring planning permission, and in Wakefield permitted development rights were removed for all small HMOs (C3 to C4).
“An Article 4 consultation is currently in process in Warrington, and there is a proposal to tighten control on HMO concentrations in Bolton.”
SATURATED MARKET
Even though the HMO market has become more saturated Moss says that the public views HMOs as much more acceptable in terms of living standards than they did previously.
Now, with Article 4 Areas being expanded, he reckons that it could be a good opportunity for investors to consider converting a property into a HMO, particularly in areas where higher barriers to entry are soon likely to be implemented.
He says: “Typically, HMO conversion costs are not extreme, as dependent on the condition and size of the property, they can often be reconfigured into good quality HMOs with en-suites for under £30k.”
