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London Landlords Cling to Lucrative HMOs

In London, owners of Houses in Multiple Occupation (HMOs) are holding onto their properties tightly, with only a few listed for sale. Investors eager to tap into this market are thus likely to find themselves needing to convert residential homes into HMOs to establish a foothold.

Octane Capital, specialists in property lending, conducted research on the availability and sales of HMO stock across different regions of England. The data reveals that London dominates the HMO landscape, boasting approximately 83,900 HMOs. This figure accounts for a significant 38.7% of England’s total HMO stock.

Despite the abundance, only a minuscule 0.2% of these properties, a mere 164, are currently listed for sale. This reflects the long-term investment mindset of London HMO owners who seem reluctant to part with their lucrative assets.

HMOs are appealing to investors due to their potential for strong returns. Octane Capital’s previous research indicated that a typical HMO housing four tenants could yield a monthly rent of £593 per room, totalling £2,372 per month. Consequently, the average yields are around 8.1%, outstripping the 4.4% yield from a standard four-bedroom property.

However, the scarcity of HMOs for sale is not confined to London. Across England, only 1.6% of the 217,000 HMOs are presently listed for sale.

For investors seeking to purchase an HMO, the South East presents a promising prospect with 654 listings, the highest of any region. These listings account for 19.4% of all HMOs currently for sale. The North West follows closely with 507 HMOs, or 15.1% of the national stock for sale, while the East Midlands holds third place with 448 HMOs on the market.

Jonathan Samuels, CEO of Octane Capital, stated, “London is by far the toughest region when it comes to finding a ready made HMO for sale. Yes, it may have a hefty supply of stock, but owners of HMOs are seemingly in it for the long haul in the capital, and are showing a lack of appetite to sell. As a result, you’re better off buying a residential or commercial property and converting it into an HMO in London, despite the challenge of gaining permissions. Finding an HMO for sale can often feel like looking for a needle in a haystack, but you’ll have an easier time if you stick to regions like the South East, the North West and the East Midlands.”