HMOs cited as the preferred property type for investors in 2016

21 March 2016

The Shawbrook Client Barometer reveals clients' expectations for the market this year

HMOs are predicted to be the most popular property type for property investors this year, according to the latest Shawbrook Client Barometer*. The survey looked into the outlook for 2016 from property professionals and the expectations they have for their own investments.

Over a third (34%) of investors cite HMOs as their most preferred property type, an increase which has more than doubled from 16% in July 2015**. The latest figures reveal that terraced housing is now the second most preferred property type for property investors (28%), followed by flats and maisonettes (22%).

It seems that property professionals are still working hard to understand the nuances of the HMO space, in particular with regard to valuation, planning and licensing, with over 50% of those surveyed finding these complex areas an ongoing challenge. Overall, over two fifths (42%) of those surveyed currently have an HMO property in their portfolio while a further 46% wish to enter or expand into the HMO market.

The high potential yields of HMOs are seen as an attractive proposition for property investors in the UK. Nearly three quarters (72%) of investors cited yield as the main attraction for investing in an HMO followed by the potential for capital growth (29%). Reduced risk of rental voids, compared to standard buy-to-let properties is also seen as an attraction for investing in HMOs in 2016 (18%).

Karen Bennett, Sales & Marketing Director of Commercial Mortgages at Shawbrook says:

“As a lender, we’ve certainly seen a surge on interest in HMOs over the past year and our recent broker and client barometers confirm a big appetite in the market. This asset class has undergone significant change over the past decade with some very clear tenant and investor profiles emerging to bring some real quality to the sector.

Whilst the high yields make for an attractive investment, caution must be taken with regard to planning and licensing requirements, along with the challenges and pitfalls of the valuation process. Working with a professional broker is a sound strategy in order to take advantage of the opportunities on offer for borrowers looking to expand into this market, and their knowledge and experience bring a huge amount to the table when trying to achieve a good outcome for the borrower.”