The private rented sector, and the HMO market, in particular, has seen increasing demand, which has led to rising rents. At the same time, landlords are experiencing a drop in void periods, which helps investors minimise the time that rooms sit empty.
In this blog post, we’ll cover what’s impacting supply and demand, rents, and void periods, in addition to how location continues to be key and the importance of knowing the ins and outs of your local HMO market.
Supply, Demand, and Rents
Good quality housing stock continues to be in high demand and low supply. As many workers returned to the office and COVID-19 restrictions eased, professional HMOs have been in especially high demand.
While the rise of the Omicron variant slowed down the momentum slightly at the beginning of the year, the sector quickly picked up the pace. And for many landlords, it has felt like the HMO market is moving at full speed ahead!
Recent SpareRoom data showed that all UK regions saw an increase in rent when comparing 2021 with 2019, besides London and the West Midlands. Throughout last year, Northern Ireland, South West England, and Scotland recorded the highest rent increases.
Demand vs supply is also up in most regions across the country. This is a trend happening within the private rented sector as a whole and is one of the major factors pushing rents up more and more.
Additionally, a number of studies are showing the need for more housing in the private rented sector, and the HMO sector is one of the areas where we can actively create new rental units. This will help bring forward more high-quality properties and will also help alleviate pressure due to the housing shortage.
Void Periods and Tenant Salaries
As more positive news for investors, void periods are down for privately rented properties. Data from Goodlord revealed there was only one region that saw an increase in voids during February. As landlords are renting their rooms and HMO properties more quickly, this means the amount of rent lost is falling!
At the same time, there has been a rise in the average salaries of tenants in England since the beginning of the year. The average salary for a tenant in 2021 was £26,111. Over recent months, this has increased sharply as average salaries in February hit £28,115.
This is positive news as the cost-of-living crisis continues in the UK with inflation rising even higher and energy bills and the price of oil and food skyrocketing. It’s important for salaries to keep up with rising inflation and living costs, which will help tenants be able to keep paying rent and their household bills.
The Importance of Location and Becoming Your Own Local Expert
As we know, location is everything when it comes to HMOs. This is particularly key as this strong demand, rent increases, and drops in void periods aren’t happening everywhere. For example, rent for rooms in London is at the lowest level since 2014, according to data from SpareRoom.
Location helps determine the success of any property investment. Because of this, it’s important to become an expert in the locations you’re investing in and understand the ins and outs of the local HMO market. What is happening with supply and demand? What is the competition doing? What is the rental strategy profitability and long-term capital appreciation prospects?
SpareRoom can be a great place to start as it has a huge amount of data that can help you understand the competition and supply and demand in a specific area. To effectively build a sustainable property portfolio, work on understanding your local HMO market and how to attract the right tenants to your properties.
For more helpful insights on the HMO market and how to start, scale, and systemise your property portfolio, become a member of The HMO Roadmap today!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!