Tenants demand better quality and bigger HMOs, survey…

The Majority said demand for high-speed broadband had increased over the past year, while a significant proportion of renters were looking for larger bedrooms, en-suite bathrooms and better quality furnishings. And 35% of respondents said tenants are asking for offices to enable working from home.


Paragon Bank’s Managing Director of Mortgages, Richard Rowntree, says: “HMOs used to have a reputation for offering poor quality housing, but that perception is changing as landlords improve their stock and meet changing tenant demand. . Tenants will no longer accept poor quality; they want broadband, better bathrooms and furniture.


“We have seen strong growth in demand from owners to acquire HMOs during the pandemic. This may reflect the wider scarcity of rental properties, with tenants opting for one bedroom in a shared home as one and two bedroom properties are in short supply. Tenants also appreciate the flexibility and social nature of HMOs, especially if they rent with friends. »


Rowntree says the investment case for HMOs is compelling, with 47% of owners with an HMO agreeing that they offer better rental returns than other residential rental properties. About 40% said HMOs offered better financial protection against voids, while 53% said there was no significant difference in capital gain between single units and HMOs, making income the decisive factor.


The largest proportion of HMO owners, 42%, reported net returns above 10%, while two-thirds reported returns of 8% or more.


Nearly half of HMO tenants were in the young single category, mostly students, white-collar workers, office workers or professionals. Elsewhere, 27% of tenants were workers, of which 15% were older single people. Smaller groups included Universal Credit claimants, families with children and migrant workers.


One in five tenancies had been in place for two years, but by far most tenancies were for one year. Only 2% of leases lasted more than five years.

The survey also found that given shifts in tenant demand and higher yields on offer, HMO owners are more likely to buy additional inventory than sell.


More than four in 10 HMO owners said they plan to buy an additional HMO property in the next six months. As for those looking to downsize their properties, 4% said they plan to sell all of their HMOs and exit the industry, with 8% intending to downsize their HMO holdings over the next 12 months.


Rapidly rising energy costs emerged as the favorite when HMO owners were asked what their biggest challenge had been over the past 12 months.


Two-thirds of respondents said higher energy bills had been a concern, reflecting the fact that 62% of HMO rentals include all bills, including energy, broadband and utility tax. dwelling.


An additional 14% includes utility bills only – gas, electricity, water and council tax.


While one in five landlords said they have no plans to pass on higher energy bills to their tenants, more than half plan to raise rents to cover the higher cost of living. raised. Some 19% have already increased the rents of their tenants.


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