HMO Property Predictions 2023
Top 2023 HMO Property Predictions
It is 2023 and all New Years resolutions have been far forgotten the Christmas weight will eventually go let’s not worry about that as 2023 has a lot in store for us in our HMO property market.
Here are Relo’s top 2023 HMO property predictions.
1. Rents will continue to rise as demand for HMOs increases.
Rents will continue to rise as demand for HMOs increases. As HMOs become more popular, rents are expected to rise. However, there are both pros and cons to this trend.
Pros to the increase in HMO popularity
- As the cost of living continues to increase, more people will seek out cheaper living options like HMOs, making them an attractive choice for all-inclusive accommodation.
- Higher utility bills can justify higher rents for landlords.
- A shortage of high-quality HMO properties means less supply and more demand, which can further increase rents.
Cons to the increase in HMO popularity
- Difficulty in obtaining mortgages currently may cause people to delay purchasing or renting, resulting in fewer available properties and increased competition between landlords.
- Mortgages for HMOs are typically higher and harder to obtain, and rising running costs may reduce landlord profits.
2. Interest rates are going to continue affecting financing.
The current inflation rate stands at 9.6% and the Bank of England base rate is at 3.5%, which is expected to increase to 4-4.5% over the next 12 months before falling again. This means that mortgages are more expensive than ever before. With higher base rates, financing (mortgages) becomes more expensive, thereby impacting the profit margins of landlords who are looking to start or continue in the property industry, especially with HMOs. In addition, banks are making it harder for people to get financing for properties, particularly for buy-to-let housing in 2023.
3. Rising utility costs will impact profits.
HMOs are preferred by tenants as the majority include bills in the rent, making it cheaper for them to live in them than to rent on their own. However, with the rise in running costs, landlords can expect a decrease in profits. This makes it harder for landlords to break even if they do not have full occupancy in their HMO.
Nonetheless, the advantage to this is that people who cannot afford their bills anymore will be looking to leave their rented accommodation and relocate to HMOs or properties that offer all-inclusive living. As a result, landlords’ properties will be more popular than before.
4. Increasing build costs will impact capital investment into HMOs.
During the Covid pandemic and the Ukraine conflict, we saw a significant increase in material prices, which appears to be decreasing now. However, due to the rise in the cost of living, the cost of labour has also increased significantly. This affects the cost of refurbishing HMOs, meaning landlords may need to invest more capital and potentially have it locked into their investment properties.
5. We will see house prices continue to fall.
As we enter into a deeper recession, house prices are expected to continue falling. This presents an opportunity for individuals to purchase cheaper HMOs to either expand their property portfolio or start anew in this constantly changing industry. However, the downside is that refinancing HMOs will become more challenging.
6. We will see the tightening of legislation and compliance around HMOs.
Local authorities are enforcing stricter regulations and compliance for HMOs, resulting in a growth of professional landlords in the industry. This removes the amateur landlords who operate low-standard HMOs solely for profit, which ruins the properties and results in subpar living conditions for tenants.
The rise in demand for proper housing and stricter regulations has created a better reputation for HMOs nationwide, ultimately increasing the popularity and trend of co-living.
In 2023 we will see a lot of changes across the board, some negative but a lot of positive impacts. If you are new to the world of HMOs do not despair, this is the start of good things to come for the industry but if you are overwhelmed and not sure what to do, contact us here at Relo and we are happy to advise, inform and manage any HMO property. Get in touch now!