The UK rental market is witnessing a notable trend as landlords increasingly opt for Houses in Multiple Occupation (HMOs) to enhance their investment portfolios. According to recent data from specialist lender Shawbrook, the proportion of HMOs in the buy-to-let sector has risen significantly, reflecting a strategic shift among property investors in response to ongoing economic changes.
Growth in HMO Investment
According to Shawbrook, there has been a noticeable increase in HMOs within the buy-to-let sector. Data reveals that HMOs accounted for 27% of Shawbrook’s buy-to-let business in both 2022 and 2023. This figure has climbed to 34% in 2024, indicating a growing preference among landlords to diversify their investment portfolios with HMO properties. This trend is also seen among non-portfolio landlords, where investment in HMOs has risen from 17% to 21% during the same period.
Diversification as a Strategic Response
The shift towards HMOs is part of a broader strategy by landlords to navigate through the economic uncertainties of recent years, including those brought on by the pandemic. Daryl Norkett, Director of Real Estate Proposition at Shawbrook, explains: “As landlords have dealt with years of challenges stemming from the pandemic and culminating in the past couple of years of economic uncertainty, HMOs have proven to be a sound strategy for landlords looking to diversify their portfolios, as well as strong option for non-portfolio landlords entering the market.”
Enhanced Lending Criteria and Future Prospects
Shawbrook has responded to the increased interest in HMOs by adjusting its lending criteria, allowing landlords to secure larger maximum loan sizes. This adjustment is anticipated to fuel further growth in the HMO sector, especially with the expected cuts in interest rates. Norkett adds, “We have already seen a modest increase in HMO activity, once the predicted interest rate cuts finally arrive, we’d expect to see significant growth in this sector.” This proactive approach by Shawbrook highlights the lender’s commitment to supporting landlords as they adapt to a transforming market landscape.
