If you already plan to invest in an HMO, the likelihood is you know it’s a lucrative market but not one without its challenges. Location is going to be key to seeing a good return on your investment. Property values are consistently on the rise in the North of England, in areas like Leeds, as well as parts of Scotland, such as Edinburgh, which saw a rapid recovery from the pandemic. There are some great investment opportunities available in these cities right now; the question is how do you find the best one to make an investment in?
Edinburgh vs Leeds
Both Edinburgh and Leeds regularly feature in top HMO investment lists. The two cities have a natural ability to maximise rental potential, benefitting particularly from a high student population. Not only does Edinburgh have approximately 41,000 students living within its city, but it also benefits from its status as a tourist destination whilst Leeds has around 39,000 students, but with a large banking sector established here, offers appealing work prospects to young professionals who will, naturally, require accommodation. Hence, Many old homes are available for sale; if they could be renovated through specialized agencies such as Talon Home Builders, it could become a great rental opportunity after buying.
Edinburgh: pros and cons
Benefitting from a quick, post pandemic recovery, the Scottish property market is thriving right now. As of June 2022, there was an 8% rise in property prices versus the same time last year.
Edinburgh’s buy-to-let market however, has been thrust into the spotlight recently, with concern that many of the city’s properties are being bought up by a group of so-called “super landlords”. This group of 15 landlords currently make up 9% of Edinburgh’s private rented sector- the equivalent of 5,300 properties. Not only this but 26% of the city’s HMOs are owned by only 12 landlords, each of whom own over 50 properties. Local MPs have called for further investigation into the private rental sector in Edinburgh as there is belief that stricter regulations are required, particularly given that there is a housing crisis in the area at present.
From a potential investment point of view, this current uncertainty makes the idea of investing somewhat off-putting, however nothing has been implemented yet and with an impressive average rental yield of around 6%, it remains an ideal investment opportunity.
Economically, the city always performs well. It has a diverse economy and unemployment often remains lower than many other parts of the UK. With its higher education and employment opportunities, students and young professionals alike are often drawn to the city. Whilst Leeds does have a tourism market, it is on much less of a scale in comparison to Edinburgh which benefits from being Scotland’s capital city making it a popular destination with European jetsetters looking for a great British getaway.
If you think Edinburgh is the investment spot for you, then you may wish to start thinking about which part of the Scottish capital is going to give you the best return and rental income. HMO rental expert, Dwell Leeds, would recommend areas such as Liberton which is known for its buy-to-let market as it is a popular choice amongst students and professionals. Also consider the southwest Edinburgh as it is a more up-and-coming part of the city, with competitively priced properties and great transport links.
Leeds: pros and cons
Leeds, albeit slightly smaller than Edinburgh, has had an 8.1% capital growth in the past 5 years alone and this shows no signs of slowing down. Savills predicts 24.3% growth in the Northwest and Yorkshire by 2026. Its affordable housing market, that is 26.7% cheaper than the UK average, offers the opportunity for some excellent investment returns.
It is a pivotal part of both Yorkshire and the North West’s economy, partly attributed to having the country’s largest banking and finance sector, which in turn has encouraged many young professionals to settle here. The city is also undergoing extensive regeneration which has seen the economy grow faster here than in London. The regeneration opportunities have brought about a huge offering of new, affordable housing and buy-to-let properties within the area, further heightening its appeal to investors.
Its appeal doesn’t just stop at its economic prospects, it has a bustling nightlife and is known for being one of the most affordable cities in the UK with the price of a pint of lager being just £3.75 versus a more unpalatable £4.50 in Edinburgh.
The private rental sector of Leeds is now the second largest behind home ownership in the city, so much so that it now has a larger market than that of the social housing sector. Leeds also often ranks top for prices of terraced houses vs room rents. For investors searching for consistency and longevity in their rental investments, Leeds offers just that as it has a stable and reliable demand for long-term lets. With an average rental yield of 8.97%, it is certainly a serious contender for those looking to purchase an HMO.
Property experts at Dwell Leeds suggest areas such as Woodhouse, Burley and Hyde Park would make ideal HMO investments as it is known locally as a Leeds student hotspot as well as demand from local Leeds workers.
To conclude
Both Leeds and Edinburgh benefit from having booming economies and a property market that continue to excel in challenging times. The investment potential in both is clear for all to see however, Leeds offers some slightly more promising figures with the added bonus of an already well-established HMO structure and guidelines in place. The recent controversy surrounding Edinburgh’s buy-to-let market gives it an air of uncertainty. With all the stresses surrounding HMO licensing and mortgages, swerve the drama and give yourself one less challenge by placing your investment bets on Leeds. You won’t regret it!
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