According to analysis by Octane Capital, the average HMO is valued at £364,508, which is 32 per cent higher than wider market value of average properties.
The HMO data was sourced from analytics firm Property Data and the wider market data was sourced from government figures.
The heightened value of HMOs becomes more acute in North East where market value is more than double, 109 per cent higher, than the wider market value.
This is followed by London where the HMO price premium is 72 per cent, the West Midlands where it is pegged at 55 per cent and Scotland at 41 per cent.
The premium is at its lowest in the East Midlands, where the average prices of HMO properties are two per cent higher than the value of wider market properties.
The specialist lender said the HMO price premium could possibly show that licensing law changes which have been phased in since 2018 have had a “limited impact” on appetite for the property type.
The changes mean a licence must be obtained for a property that is occupied by three or more people from different households but share facilities like a bathroom or kitchen.
There are also added challenges with HMOs as they can be harder to find finance for and may have additional planning restrictions. Set-up and ongoing costs can be higher, along with management requirements.
However, the lender said the higher price premium for HMOs showed professional buy-to-let landlords were “still hungry” for this kind of property due to benefits of greater rental income and capital growth.
Octane Capital’s executive Jonathan Samuels said there was no doubt HMOs were “more complicated” than a regular buy-to-let option but that didn’t mean they should avoided as an investment.
He continued that HMO financing was a “very straightforward endeavour” when you used a sector specialist.
He added that along with greater rental income and capital growth landlords were less susceptible to rental arrears and void periods were shorter, especially in cities as demand from single tenants was “consistently high”.
Samuels said: “Even though the initial cost of investment is greater, and new licensing laws do present an additional hurdle, rental values and yields are also generally higher with HMOs and so while they may take a little more time and effort to get up and running, you tend to reap the rewards once this hard work has been done.
“Many HMOs will also offer the benefit of an existing licence. In some cases, this licence may have expired, although this still puts you on the front foot as obtaining a new licence should be far easier.”
