Being a HMO Landlord in Portsmouth
Sep 20, 2017
The landscape of the Portsmouth property market is shifting. Portsmouth has become an investment hub over the last few years with property investment and rental yields up there with the highest in the country. There has been a huge surge in the demand and performance of HMO property and with the introduction of the Article 4 policy which has attempted to restrict the number of HMOs, any HMO is currently considered as gold dust for any landlord.
However, this trend may now be changing. The key reason for this is the supply surge of purpose built student accommodation in Portsmouth, which is modern, convenient and located in prime student areas. This increased available supply is extracting students out of HMO properties and providing a problem for HMO Landlords. This year there are still over 100 HMO properties available to let on the market which is a huge increase from last year. This same year has also seen the addition of 2,000+ purpose built student rooms which even with increasing student numbers is a big influx of supply and was always going to put pressure on HMO Properties in inferior locations.
This pressure on existing HMO Landlords will likely lead to several outcomes;
1. Landlords are already and will continue to drop their rental prices rapidly in a way to attracting students and trying to compete with the better located and better-quality student supply
2. Landlords will attempt to attract professionals as the student demand dwindles, however there wont be enough demand from professionals to fill the student void
3. C4 HMO planning will no longer be considered as gold dust and Landlords will need to be creative in finding other ways to add value to their investment through development potential and planning gains
4. As Landlords see reduction in income streams they are likely to be inclined to put their HMO property on market for sale, this will create a highly competitive field and leave some Landlords having to reduce price levels significantly as buyers will have plenty of choice
5. As income streams from rents diminish, so will the rental yields for prospective buyers. This will only lead to a decrease in property values for HMO properties a buyers will expect to purchase on a fair net rental yield and for a HMO property this is normally a minimum of 6% in Portsmouth
6. Buyers, especially those that are located outside of Portsmouth, will start to look at other market in the country where rental yields are performing better
7. Families and professionals will have a greater choice of properties to rent and buy from as voids are left by drop in student demand
Obviously most of the above are somewhat negative in nature, however the market changes do provide an opportunity for Landlords that are happy to accept things are changing and will look at different ways to create value from their assets through development upgrades, different planning consents and looking at ways to cater for growing demand markets i.e modern studio apartments for professionals
For more information on the property market, please feel free to get in touch any time
Jamie Gray, Director, G5 Properties, Jamie@g5properties.com, www.g5properties.com