HMOs can beat capital appreciation of same size houses - claim

The average HMO is worth a third more than a comparably sized house according to new research.

The typical HMO now costs £364,508 says Octane Capital, which used government data measured by analytics firm Property Data and the wider market data was sourced from government figures.

Octane’s chief executive Jonathan Samuels says this shows that despite the more complicated nature of HMOs than single-unit buy to lets, they should not be avoided by keen investors.

“Even though the initial cost of investment is greater, and new licensing laws do present an additional hurdle, rental values and yields are also generally higher with HMOs and so while they may take a little more time and effort to get up and running, you tend to reap the rewards once this hard work has been done.

“Many HMOs will also offer the benefit of an existing licence. In some cases, this licence may have expired, although this still puts you on the front foot as obtaining a new licence should be far easier.”

There are significant regional variations to the capital appreciation of HMOs. 

In the North East their typical market value is 109 per cent higher than a comparable sized house while in London it is 72 per cent.

The premium is lowest in the East Midlands, where the average prices of HMO properties are a mere two per cent higher than comparable properties.

Octane says the increased burden of HMO licensing has had only a limited impact on demand and pricing.

“While they may take a little more time and effort to get up and running, you tend to reap the rewards once this hard work has been done” says Samuels.