Large student and youth populations are helping to fuel high rental demand
in parts of the country for houses in multiple occupation (HMOs), Simply
Business reveals.
It has analysed more than 100,000 insurance policies to identify the top
investment opportunities and ‘to let’ buying hotspots for 2025. The
provider of small business and landlord insurance says that the UK’s prime
locations for HMOs are London, Birmingham, Bristol, Manchester, Leeds,
Cardiff, Nottingham, Edinburgh, Liverpool and Coventry – all of which have
high student populations.
The insurer says that with potential increases in stamp duty, tighter
energy efficiency regulations and higher mortgage rates, portfolio
ownership may become less appealing for landlords.
That means HMOs could emerge as a more attractive investment option for
landlords.
‘Importance and resilience of landlords’
The firm’s chief executive, Julie Fisher, said: “Though challenges remain,
the importance and resilience of landlords – and the market – should not be
underestimated.
“Rental demand remains high as people seek flexible housing to suit their
studies and work, and landlords that are able to follow and adapt to the
changes effectively can absolutely still find opportunities for steady
rental income and capital growth, with a vital role to play in the UK
housing market.”
The research also includes the top buy to let hotspots, based on the
increase in new landlord insurance policies between 2023 and 2024, which
are:
- London: 13%
- Birmingham: 12%
- Leicester: 12%
- Leeds: 11%
- Manchester: 10%
- Nottingham: 10%
- Bristol: 9%
- Edinburgh: 9%
- Liverpool: 8%
- Glasgow: 7%
Minimum Energy Performance Certificate
Ms Fisher said: “It’s incredibly telling that we’re starting to hear
landlords talk about availability of tradespeople in the context of their
investment decisions – driven in large part by the new minimum Energy
Performance Certificate (EPC) regulations.
“We know from
our research
that half of landlords need to make improvements to reach an EPC rating of
C, and over a third (34%) report they will need to spend up to £10,000 to
comply with the rules.”
Simply Business also notes that rising costs are a major issue for
landlords, with 38% considering them the biggest threat to the sector.
And more than a third (35%) reported higher monthly mortgage repayments
last year, up from 31% in 2023, with 10% of landlords reporting rises of up
to £1,000.
London also boasts the UK’s biggest group of multi-property landlords –
followed by Manchester, Birmingham and Nottingham – and the trend looks set
to continue into 2025.
London areas with consistent rental growth
For landlords looking to invest in London, then new research from Benham
and Reeves, a leading lettings and estate agency, will help.
It has identified the London areas which experienced the most consistent
rental growth in 2024.
The analysis, which examined monthly rental price growth across all its
offices, found that Shoreditch topped the list with an impressive 6.6%
average monthly rental growth.
Canary Wharf and Ealing followed closely behind, both recording 5.9%
monthly growth.
Kew (5.8%) and Hampstead (5.7%) rounded out the top five strongest rental
markets.
Citywide, average rents climbed by 4.3% per month in 2024, demonstrating
strong demand for rental properties across the capital.
‘No surprise to many student landlords’
Simon Thompson, the managing director of
Accommodation for Students
, said: “This could be a pivotal year for landlords navigating a complex
lettings market.
“While challenges like rising costs and new regulations persist,
opportunities remain.
“It should come as no surprise to many student landlords that HMOs are
emerging as a strong investment option in areas with high student and youth
populations.”
He added: “Landlords who adapt to these changes, prioritise energy
efficiency, and maintain strong relationships with tenants will continue to
thrive in the evolving rental sector.”
