According to a new survey by Lendlord, North East HMO yields are some of the highest n the UK, with an average yield of 15.4%, significantly surpassing the national average of 10.4%.
Houses in Multiple Occupation (HMOs) have become an increasingly popular investment strategy for landlords seeking high rental yields. Unlike traditional buy-to-let properties, HMOs generate multiple rental incomes from a single asset, often resulting in stronger cash flow and return on investment.
The UK’s HMO market has seen significant growth over the past decade, particularly in regions where property prices remain affordable while rental demand remains high. The North East of England has emerged as a top-performing area for HMO investors, delivering some of the best yields in the country. But what makes this region so attractive, and what should investors consider before entering the market?
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Why the North East Leads in HMO Yields
Recent reports from leading property data providers such as Lendlord and the Landlords Guild reveal that the North East consistently ranks as the best-performing UK region for HMO rental yields. The Q4 2024 Lendlord HMO Data Analysis Report highlights that the North East boasts an average HMO yield of 15.4%, significantly outpacing the UK’s national HMO yield average of 10.4% (Lendlord, 2024).
This impressive performance can be attributed to a combination of affordable property prices, strong rental demand, and favourable regulatory conditions. With low entry costs and high rental income potential, the North East presents a compelling opportunity for investors looking to maximise returns.
Comparative Analysis: North East vs. Other UK Regions
To understand the strength of the North East’s HMO market, it’s useful to compare it with other UK regions:
Region | Average HMO Yield (%) | Average HMO Property Price |
North East | 15.4% | £201,758 |
North West | 12.2% | £245,601 |
Midlands | 10.8% | £270,000 |
Greater London | 6.08% | £660,227 |
South East | 7.2% | £545,000 |
This data highlights a clear trend: regions with lower property prices tend to yield higher returns on investment. London and the South East, while offering capital appreciation potential, present lower short-term rental yields due to high property acquisition costs.
Key Factors Driving High North East HMO Yields
Several factors contribute to the region’s high HMO yields:
1. Affordable Property Prices
The North East remains one of the most affordable regions for property investment in the UK. With average HMO property prices around £201,758, entry costs are significantly lower than in the South, allowing investors to scale their portfolios faster (Landlords Guild, 2024).
2. High Demand for Affordable Rental Housing
The North East is home to a large student population, young professionals, and transient workers who require flexible and affordable housing solutions. Cities such as Newcastle, Sunderland, and Durham have thriving rental markets, ensuring strong occupancy rates for HMOs.
3. Strong Price-to-Rent Ratio
The North East has a price-to-rent ratio of 2.7 years, meaning investors can recover their purchase costs in less than three years through rental income alone. In contrast, London’s price-to-rent ratio stands at 6.5 years, making it a much slower market for generating immediate returns (Lendlord, 2024).
4. Government and Infrastructure Investment
The North East is benefiting from significant government-led regeneration projects, infrastructure development, and economic incentives. Improvements in transport, education, and business investment are increasing employment rates, further driving demand for rental housing.
5. Less Competitive Market
Despite offering the highest yields in the UK, the North East currently accounts for only 3.5% of the UK’s total HMO market, meaning there is less market saturation compared to London or the Midlands (Lendlord, 2024). This provides new investors with an opportunity to establish a foothold in an emerging, high-yield market.
Risks and Considerations for HMO Investors
While the North East presents a highly attractive investment opportunity, there are a few considerations that landlords should take into account:
1. Local Licensing and Regulatory Compliance
HMO landlords must adhere to licensing requirements set by local councils, ensuring their properties meet safety and management standards. Investors should conduct thorough due diligence on local HMO regulations before purchasing a property.
2. Tenant Turnover and Management Requirements
Although HMOs generate higher rental income, they also require more intensive property management. Higher tenant turnover, maintenance, and compliance checks mean that effective property management is crucial for sustained profitability.
3. Market Stability and Long-Term Strategy
While rental yields remain strong, investors should consider long-term trends, economic conditions, and potential regulatory changes that may impact their HMO investment strategy.
How Clarice Carr & Co Can Help You Maximise Returns
Navigating the North East’s HMO market requires strategic planning, local expertise, and a thorough understanding of regulatory requirements. Clarice Carr & Co provides tailored support to property investors looking to enter or expand their presence in this high-yielding region. Our services include:
Market Analysis & Investment Insights – Identifying the best areas for high-yield HMOs based on current market trends.
Property Sourcing & Acquisition Support – Helping investors secure the best deals on HMO properties.
Regulatory Compliance & Licensing Assistance – Ensuring full compliance with local HMO regulations.
Property Management Solutions – Offering hands-free management services to maximise rental income and minimise vacancies.
Financial & Tax Planning – Providing expert advice on optimising your investment strategy for long-term success.
Want to know more? Check out our website or get in touch.
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