It can be difficult to know when the best time to invest your capital into property will be. There are many different factors that should be considered before investing, with thorough due diligence being the highest priority. This can be from the market value of neighbouring properties, the local amenities and employment rates too. All of which are just a few elements to consider when researching a potential area to invest in.
Another key component, is rental demand. An analysis of 33 major cities in the UK has discovered that rental demand in the UK has increased by 10% between December 2020 and June 2021.
This increasing demand has come as welcome news to many UK landlords, as some investors have been forced to suffer void periods in the last two years, owing to the global pandemic. Couple this recent rental surge with house prices currently increasing by an average of 0.84% each month and you have a great time to invest in property.
There are a number of reasons for this increase in rental demand over the last year. Firstly, the easing in lockdown rules in the UK have meant that fewer people are working from home, resulting in more people needing to move closer to their place of work, thus increasing the demand for rent. Less people are confident in buying their own house during the apprehension around the coronavirus pandemic which has resulted in an increased demand for a rental property. Someone having the option to rent their accomodation can be seen as a short term solution in a time of uncertainty. This helps the tenant to be more flexible in their decisions as they have not fully committed to the process of buying a house.
The housing market is currently flooded with people looking to buy, however the supply of stock is limited. This has contributed to a steady increase of house prices as the demand is high but the supply is low. Renting is seen as a temporary solution during this time which contributes towards a higher rental demand.
Renting a room in an HMO is becoming more of a suitable option for many of our tenants. The cost of a two bed flat often exceeds a tenant’s budget, especially for recent graduates or entry-level employees. This means more people are looking to rent a room in an HMO as it is likely to be more affordable than a flat with a friend also contributing to the increase in rental demand.
HMOs do not only benefit tenants, but they also benefit investors too:
- HMOs are the second largest tenure in the UK
- Roughly 4.5 million people live in HMOs
- There are around 500,000 HMOs in the UK
- The average gross yield for an HMO is 15% whilst the regular buy-to-let gross yield is 7%