Landlords are planning to acquire Houses in Multiple Occupation (HMO) more than any other property type over the next 12 months, Paragon’s Q4 2019 PRS Trends report has found.
Of the landlords planning to purchase property in the next 12 months nearly a third (31%) plan to purchase HMOs, up from the 12% recorded three months earlier.
This is the highest level since Q2 2017.
Richard Rowntree (pictured), director of mortgages at Paragon, said: “The private rented sector needs to grow to meet increasing levels of tenant demand and it’s clear that portfolio landlords will drive that growth.
“Not only are they looking to build their portfolios, they are also looking at more complex types of property that will deliver higher yields, such as HMOs.”
A quarter of landlords said they plan to acquire flats, with 18% targeting terraced housing.
Some 9% of portfolio landlords plan to add to their portfolio over the next quarter, compared to just 1% of non-portfolio landlords.
HMOs achieve a yield of 6.5%, compared to an average yield across all property types of 5.6%.
Overall landlord confidence generally remained weak during the quarter, although there was a slight quarterly uptick in landlords’ confidence.
Paragon’s Confidence Index, which is produced by landlords ranking confidence out of 10, recorded a score of 6.2.
Rowntree added: “Although still fragile, hopefully we are starting to see some green shoots with regards to landlord confidence.
“Landlords have encountered significant regulatory and fiscal changes in recent years and we hope to now enter a more settled period.”