January is the most popular month for us Brits to think about making a change in our lives, from losing weight to exercising more, to learning a new skill or quitting smoking. It is the perfect time of year to make a fresh start, like finding somewhere new to live or rent a room, or for property investors to begin looking for new investment opportunities.
With that in mind, we thought some new research looking at the cheapest and most expensive places to rent a room in the UK would be useful for investors considering buying a property to rent out as an HMO (house of multiple occupancy).
HMOs are popular with property investors as they can offer investors higher rental yields compared to other buy-to-let models. So, news that the average UK room rent (excluding London) has increased by 2% (to £484 per month) compared to this time last year is really no surprise and shows that HMOs consistently perform well in most regions (see table 1).
Average UK room rents for Q4 2019 by region and how they’ve changed
Table 1. Source SpareRoom
By contrast, as you can see in table 1, the capital’s room rents haven’t changed year-on-year in Q4 of 2019 – although they did rise by a significant 4% in the previous (third quarter) of 2019 (vs Q3 2018), so this flat month is probably not an indicator of any upcoming rental falls.
The research from one of the UK’s leading flat and house share websites, SpareRoom, which provides a comprehensive overview of how the rental market is performing across the country based on nearly 250,000 room listings, also revealed that North West England and Northern Ireland have seen the largest rent increases over the past year (3% see table 1), however, even with this rise, Northern Ireland continues to be the cheapest region to rent in the UK, with the average room rent standing at £365 per month. See the UK heat map below for the hottest and most affordable room rental prices and see table 3 to view the average rents (and annual changes) for UK’s 50 largest towns & cities in Q4 of 2019.
UK heatmap Q4 2019
At the other end of the scale, the South East currently holds the top spot for the most expensive region in the UK to rent a room (£528pm), followed by East Anglia (£493pm) and Scotland (£480pm).
Taking a closer look at the capital, south-east London continues to be the cheapest area to rent a room (average rent = £727pm) while, west-central and east-central London came top as the most expensive postcode districts in London (commanding monthly room rents of £1,076 and £1,007 respectively). The NW postcode district experienced the biggest drop across the capital, down 2%, whilst EC saw the biggest increase, up 5%. EC3 (Aldgate)*, secured the highest increase in rent across the whole city, up a huge 20% to £1,082 per month.
London heatmap Q4 of 2019
When it comes to popularity east London wins hands down, with the likes of Shoreditch (E1), Canary Wharf (E14) and Bow (E3) revealed as the busiest flatshare areas in London (based on supply figures, see table 2 below).
The 20 most popular postcode areas based on supply figures for Q4 2019
Table 2. Source SpareRoom
Here (below in table 3) are the room rental rates for the UK’s largest towns and cities as of the fourth quarter of 2019.
Average rents (& annual change) UK’s 50 largest towns & cities Q4 2019
Table 3. Source SpareRoom
*Sample size very small