The HMO Forecast: My Property & Economic Predictions for 2025

Happy New Year! It’s officially 2025, and in today’s episode, we’re going to look at some predictions and key trends for the year ahead.

We’ll talk about property values, the overall economy, and the rental market. I’ll also highlight some risks and opportunities that could impact us as HMO investors.

There’s a lot to cover, but I think this is an important episode and a great way to kick off the year. I’m really excited to see what our community will achieve in the property market—and especially in the HMO space—this year.

Topics covered in this episode:

• 01:06 – Reflecting on 2024 and Setting Goals for 2025
• 04:44 – Economic Outlook for 2025
• 05:12 – Predictions for Property Values & the Rental Market
• 17:00 – Key Opportunities for HMO Investors
• 20:18 – Risks Facing HMO Investors

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Transcript

Andy Graham (00:02.67)

Hey, I'm Andy and you're listening to the HMO Podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short-term investment plan soon became a long-term commitment to change the way young people live together. I've now built several successful businesses. I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover the tips, tricks and hacks, the ups and the downs, the best practice and everything else you need to know to start, scale and systemise your very own HMO portfolio now.

Andy Graham (00:40.654)

Well guys, it is officially 2025, so happy new year. I really do hope that 2024 was a great year for you and for your family. But look, a great year isn't a year where everything goes to plan. Very rarely does that happen. A good year is one where you made progress, where you enjoyed it, you felt fulfilled and content with what you're doing. Now, my advice is to take whatever you did or didn't achieve in 2024.

Take those lessons, roll it forwards and use it to your advantage in 2025. Use those marginal and incremental improvements wherever you can find them to make the next year a little bit better. And over time that will compound and you will achieve incredible things. Now at this time of the year, I am in goal setting mode. I love it. I'm recording this between Christmas and New Year. I get a bit of quiet time. I get a bit of time to myself where my phone isn't ringing and my emails aren't pinging. 

And I quietly reflect and I start thinking ahead. Now to set goals and targets and objectives, I like to have an understanding of what I think the economic outlook for the year looks like. That information helps inform the goals and targets that I set and more specifically how I think I'm going to be able to achieve those goals and those targets. In today's episode, I'm going to break down some predictions and assumptions for the year. We're talking about property values, wider economic considerations, the rental landscape. And we're going to be talking about some more specific risks and opportunities that may lie ahead for you and I as HMO investors. 

So a lot to cover in today's episode, but I think that this is a really important episode and absolutely a great way. In fact, probably the only way to kick off 2025. Before we do, can I just take this opportunity to wish you the very best of luck this year? I really want to see you go out there, hit and absolutely smash all of your targets and goals and objectives. And I'm really looking forward to watching you guys, our entire community, do great things in the property market and more specifically the HMO space this year. 

And just another quick one. I just wanted to say thank you so, so much for continuing to turn up week in, week out and listening to the podcast. Today is our 289th episode, which is a feat so unimaginable to me when I first sat down and recorded that very first episode. But you guys are so loyal.

Andy Graham (02:58.062)

And I am so, so incredibly grateful for your continued support. I just wanted to take a moment to stop and say thank you. It really does mean the world to me and our team. And obviously the podcast would not exist without the many, many thousands of people, you guys that tune in every single week. I'm just really, really grateful and appreciate it more than you could possibly know. Okay. Without further ado then, are we ready to get 2025 kicked off? Please sit back, relax and enjoy today's episode of the HMO podcast.

Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO roadmap really is your one-stop shop. Inside the roadmap, you'll find a full 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer, and how to manage your properties and tenants for the future. 

We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets, and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from. And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side, and track the key metrics that are most important to you. To find out more, head to theHMOroadmap.co.uk now and come and join our incredible community of HMO property investors.

Andy Graham (04:44.174)

Okay, welcome back gang. So today is of course our first episode of 2025 and we are going to hit the ground running with some predictions about the economic outlook, the property outlook and the risks and opportunities that I see ahead for the property market, more specifically the HMO property market in 2025. So like I said in the intro to today's episode, this I think is a really important exercise to do that you might conclude on a slightly different opinion to me. It is absolutely fine. 

Look, I'm not saying that my predictions are the right predictions. This is just what I'm going to be working towards and considering this year. You can come up with your own conclusions. That is absolutely fine, but I'm just going to offer you mine on the show today. But I think what is important is that you do have your own opinions on this or you're working to something because that can inform your goals and objectives and how you're going to get there. What you actually do, the actions that you take to achieve and hit your goals and targets and maybe to mitigate some of the risks that might appear along the way as well. 

So we're going to cover a few things today. We're going to cover the wider economic landscape. We're going to cover property values, rental values. We're going to touch on some of the risks and opportunities that I think might surface in the year as a result of some legislative changes and some of the bits and pieces that you will have no doubt been keeping up to speed in the news and stuff like that as well. 

So what do I think at a glance 2025 will look like? Well, let me be honest, slightly better than 2024. Do I think it's going to be one of those years when we get in a rocket ship and go to the moon? I don't think it is. I think that that's very, very unlikely. I can't see anything that is sort of indicating that at the minute, but I also can't see anything indicating anything too terrible, which is good and important because actually, if you look back at the last few years, it has been tricky, hasn't it? It's been unpredictable on so many occasions sitting down at this point in the year just looking at what may lie ahead. 

It's been so unpredictable. We've been looking at there was COVID and then there was the inflation and then there was a new government last year. This year actually, hopefully a lot of that is under wraps and we've got a new government in and whilst we might not be happy with that and some of the changes that they've made, what it does give us is a certain degree of stability and predictability. And that's really, really important when we're building businesses. It's really useful and it's very, very valuable. And we just need to find the opportunities amongst that. 

Andy Graham (07:08.174)

So let's get stuck into today's episode. We're going to kick it off with, I suppose, the outlook on the economic landscape this year. I'm going to give you a few predictions from the experts. Goldman Sachs thinks that UK GDP will be up 1.2 % across the year, which is a relatively cautious opinion on recovery, I would say. Bank of England forecasts a slightly higher figure at 1.5%. And they think that's going to be driven by some improved business investment. CBRE.

Quite an optimistic view actually at about 1.8%. They think the stability brought by inflation, which is now significantly reduced and easing on borrowing costs, obviously seeing the Bank of England reducing the interest rates in recent months. They think that that is all sort of looking positive and favorable towards sort of GDP and economic growth. Interestingly, the last few days just before recording this, Keir Starmer has been quite vocal and I think really sort of reaching for some solutions to actually boost growth. I think that there is maybe a bit of anxiety in government at the minute that growth is stagnating a bit. That's a huge concern. Goldman Sachs, I think that 1.2 % was and is a relatively cautious sort of prediction, but actually I'm going to go with that one. I don't see anything, especially after the budget earlier at the end of last year, that's really exciting or encouraging to look at from a growth perspective.

A lot of people, lot of businesses leaving the UK, we know that that's a big problem at the minute. We're still grappling with some really fundamental issues like immigration that is largely uncontrolled at the minute. There's a lot of issues that still remain unresolved and the government have really got their work cut out to get on top of some of this stuff. So I actually don't feel overly optimistic about this. I think 1.2 % is probably where I'm going to place my bet. 

But like I said, I think stability and predictability is probably more important than anything. I'm certainly not seeing anything that is concerning. I don't think we're staring down the barrel of a recession or anything like that over the last few years. Actually, I think at any point we could have reasonably argued that that was quite a possibility. So I think that that's where we're going to end up. So not a hugely exciting year for growth for the UK in my opinion at least, and I haven't come across many particularly exciting predictions for growth in the UK.

Andy Graham (09:30.414)

anyway from anybody. So let's look at interest rates within that context and within that discussion of economic growth. Obviously rates have been coming down at 4.75% at the moment. KPMG reckons that the Bank of England will finish the year at about 3.5% to 3.75%. Goldman Sachs much more optimistic at 2.75 to 3% by the end of the year. They really do think that that inflationary pressure that's subsiding is going to help those interest rates down more quickly now. 

The Office for Budget Responsibility, the OBR, they think rates will stabilize at about 3.25 to 3.5 % by the end of 2025. The IMF, International Monetary Fund, they expect rates to stabilize at 3.5%, which I suppose reflects Bank of England's relatively cautious stance. And look, that's where I'm going to hang my hat. 3.5 % I think is where we might end the year. I think that would be really good and I think there's a possibility that that could be higher. Maybe we won't get that low, maybe 3.75%. And we've really, really, really, really got to work hard as a nation to keep inflation down. There's still a lot of stuff and stuff actually well outside our control that could push inflation up again. So we've got to keep a tight grip on that, but I'm hopeful and I'm predicting 3.5% by the end of 2025. 

I'm going to come on to some of the opportunities and the benefits of some of this stuff. But for now, I'm just going to stick with my predictions. Let's move on to house prices then. So some interesting predictions out there in the market at the minute. Halifax predicts a 1.5 % rise in house prices for 2025 and actually about an 8% increase in housing completion. So I think that my interpretation of that was that they're quietly confident and probably reflects a fairly stable demand for buying houses, obviously driving those values up a little bit.

Nationwide, certainly more optimistic, expecting prices rise by between 2 and 4% by the end of the year, driven by an easing of borrowing costs. And I can see that ultimately improved affordability. Savils, again, more optimistic still, projecting a 4% increase. And actually, interestingly, Savils, and not just Savils, there's a few people with similar thoughts. They are predicting a 23, nearly 24 %...

Andy Graham (11:52.92)

growth over the next five years. That's their projection for the next five years. And I think that that's very, very, very important. Now, do I think it'll be as much as that? Personally, I don't, but do I think the next five years we will see that growth pick up? Yeah, I absolutely do. I think if we get out this year, it's still a little bit sticky. Then I think when you take inflation into consideration, property values are down quite significantly over the last few years. And I think we could really see that pick up in the next few years. 

Night Frank interesting as well, two and a half percent on the year they think. Again, citing better affordability and yeah, it's difficult to disagree with that, isn't it? So where do I think we'll end up across the year? I think we'll end up about two, two and a half percent. And I think that over the next five years, yeah, we could be at more like 20%. I can see if we can get on top of some of the growth issues that we're experiencing at the minute. I think that we could see a good few years. So two and a half percent for the year for me.

I think, and maybe 20 % over the next five years. I think there are going to be some regional variations and this is really, really important. And look, as an investor, we have to take all of this stuff with a pinch of salt because of course, wherever you are investing, it is going to be dependent on the results on what is happening on a local level. I think cities like Manchester and Sheffield, certainly according to CBRA, E and JLL, they are likely to see better growth, maybe four to 5% across the year.

Again, due to mainly affordability advantages and strong rental demand, I think London and the Southeast is going to be slower, 2-3 % perhaps according to Savile and Halifax, because relatively speaking, the affordability is already much more of a challenge down there than it is in the North. So just take that into consideration when you're thinking about this stuff and where you're investing. Let's move on then and talk about rental market predictions. Nightfrank thinks the market will grow by about five to six percent in 2025 and 18 % cumulatively up to and across 2029, largely driven by unsurprisingly higher demand and supply constraints. 

JLL, they expect rental prices to increase by 4 to 5% annually. This year, contributing to a 17% cumulative increase by 2029. I think specifically from a HMO perspective, we're going to see more. I think actually

Andy Graham (14:14.964)

CBR really thinks HMOs will outperform by another two to three percent. I completely agree. I can completely see that actually. I think this is largely going to be attributed to an increasing demand for shared accommodation. We've been seeing this for so long now, but tenants are increasingly seeking better and more cost effective solutions to their housing and accommodation because of the cost of living crisis. 

Shared housing are undoubtedly better value for money when you think about that. you take into consideration the cost of renting a flat plus then the cost of utilities on top of that, a flat that may have been £650 to £700 a few years ago is probably £900 now and the bills that maybe were £250 are probably more like £350, £400. So there's been a significant increase in that cost of living for anybody who might be independent, perhaps living in a flat on their own.

That may simply be unaffordable and continue to be unaffordable for some years now. So I think shared living and HMOs are really primed to take advantage of that supply and demand imbalance. And I think that is absolutely why we are going to see two or 3% up. So what do I think across this year, 2025, well, I actually think prime locations could see HMO rates increase by about 8%, not necessarily as much as we have seen last year.

But still very, very strong growth and certainly outperforming standard buy to let market. So I'd be interested to hear your thoughts on that actually. Come and share them over in the HMO community. Let me know what you think about that. And again, remember to take into consideration regional variations. There are some markets that are quite saturated across the UK. A lot of HMO rooms, more rooms than actually tenants there. And also you need to think about there is still a very important consideration of affordability. People do still need to be able to pay for the rent. 

I have seen HMO room rates are pushing seven, 800 pound in the Northeast. Well, depending on the sort of job that somebody's got, that is an awful lot of money and a big chunk of their take on pay every single month. Increasingly, we are seeing people living and working in central and north England who have got London jobs or London based jobs with London salaries. There is definitely some sort of impact that that is having on prices as well and rental value. So there's a lot to take into consideration there.

Andy Graham (16:33.56)

Let's just think about for a second of the impacts of landlords leaving the market. As we know, the renter's rights bill is pushing through. The repeal of section 21 is going to happen this year, which is going to make it more difficult to evict tenants, discouraging inevitably more and more landlords from continuing. They're just going to throw in the towel, aren't they? We've seen it. We are seeing it. And that's going to reduce rental availability. And I think that that is absolutely going to be a big part of the driving factor here.

So I think that that is something really, really important to take into consideration. These changes that the government have made, whilst it was all about certainly from their perspective, making it fairer for everybody, but mostly the tenant, let's be honest. I think ultimately the tenants are going to pay for this and we're starting to see it already. So let's think about some opportunities for investors then. I think there's going to be better deal flow this year. I really do. I think that the regulatory pressures, the abolition of section 21.

Labour telling us that EPC changes are coming back by 2030, the removal of fixed term tenancy agreements, which is a huge part of the student model and the academic cycle. I think all of this is going to keep pushing more and more landlords out of the market and that is going to improve deal flow. I think more certainly existing HMOs are going to come to the market than we've seen before. And I think that we are going to have more buying opportunities. Now, please don't confuse that with discounted buying opportunities.

That’s definitely not what I mean. I don't actually think those prices are going to come down. I think good quality, well located HMOs are going to be in very, very high demand for all these reasons I'm talking about today. I think rising rents is absolutely an opportunity for us. I think when you're analysing and appraising deals, I think there's a certain degree of confidence that we can have in the fact that rents are likely to continue increasing between let's say five and eight percent in key regions.

I think there's going to be some real hotspots. I think they're going to absolutely, HMOs perform above and beyond single buy to let. So that's an opportunity for us. I think that we can definitely be planning for that. And when we're thinking about the longer term view, five to 10 years, that's really quite interesting. Obviously a big, big, big opportunity for us this year is refinancing opportunities. It does look like we are primed to see rates starting to come down across the year now, like I said.

Andy Graham (18:52.056)

Three and a half percent is sort of where I think that year will end 3.75%. And that could be really helpful for you and I, if we want to maybe release some equity from deals. Actually, we've got the opportunity to refinance, just to improve our cash flow by reducing our interest repayments. I think that's a huge opportunity. And we've been really, really stifled by the pressure on interest rates, haven't we, over recent years? Simply just stress testing and affordability at the end of deals.

It's been a big, big, big challenge, but it's definitely taken a big bite out of that bottom line profit margin. I did a podcast a little while ago and my long sort of standing sort of minimum expectation of profitability in HMOs has always been 250 pound net cashflow per month, per room after everything, including management fees. And I had to record an episode last year to say, look, that has changed with interest rates where they are now 200 pound per month, per room. is kind of where you should expect to be as a net, net, net position.

I think that that's going to increase. I think we can improve on that again this year as those interest rates come down. Obviously it depends on when you are coming up for a refinance, but I think that is definitely an opportunity that we haven't really been able to take advantage of for the last few years have we. In fact, it's been going in the opposite direction for quite some time and then very, very, very slowly this year it has started to come down. Let's talk about some of the risks though, because I don't think it all looks great. I think the repeal of section 21 itself is just a challenge for us.

I think it's making it more difficult to evict tenants. I think there's going to be increased legal costs and more vacancy periods because it's important. You must, must, must be vetting your tenants and making sure that they are the right tenants and they are not likely to give you problems because it's going to be really difficult to get them out. If you operate professional HMOs, just think about the scenario where one difficult tenant makes your life very difficult and the life of all of their housemates difficult.

The housemates leave, you can't get rid of them. It's very difficult to get them out of the house. That's a really, really difficult, very expensive problem for you. And I think we need to really, really strongly consider how significant that challenge could be. So I think we've got to really keep on top of that. But I do think that that sort of change to regulatory compliance is an important one and something that we have to see as a bit of a risk. The abolition of fixed term tenancies, I think it is going to disrupt the student letting market a little bit where typically

Andy Graham (21:11.32)

We let for 12 months at a time. doesn't look like there's going to be any sort of concession made against that, even though they have for the PBSA blocks. It's quite clear what the intentions are there, but we're going to have to adapt. I've talked about this on the show before. You can probably scroll back through some of the episodes. And if you want my opinion in a bit more detail, you'll be able to find it. But in short, I think that if you do operate student HMOs, I think that your risk period, that risk of tenants leaving their tenancy early, because we can't generate a fixed term tenancy agreement, that risk is always going to be over the summer period after they've finished their exams. 

So if you operate a September to September cycle, it's that period, June, July, and August, after they've finished their exams, where they are likely, are more likely to hand their notices in and leave your property early. If on the other hand, you move your academic cycle from July to July, what that means is that they move in July, they move in a little bit earlier, but they leave in July or the end of June, they leave much sooner after they finish their exams. 

So there's much less likelihood that they're actually going to hand their notice in and leave you with a vacant property for a few months over the summer period. I actually have ran my HMOs, my student HMOs on a July to July cycle for nearly 20 years now. And some people I know listening to today's episode will do that as well. And that is the norm in their market, but there's a lot of markets in the country where that's not the norm. And I think adapting to this change, which is absolutely happening is something that you probably do want to think about getting ahead. 

If you don't, I do think that it's a bit of a risk. And I do think there's just going to be a bit of algae bargy for a year or two while we find a new normal with this piece. EPC changes, I think the reality is if those changes do come in in 2030, it's going to be expensive for a lot of landlords. And I think that is going to impact perhaps how you think about what you need to do with your refurbishments and energy efficiency improvements. 

It's quite expensive to make those sorts of changes. It doesn't look economic to me at the minute, but I think we probably do need to start thinking about that. Otherwise we might get left out in the cold. Pun not intended, but seriously, it can be really expensive to do this sort of stuff and that could impact affordability for housing or what we need to think about spending. Finally, think just general affordability challenges are grumbling on.

Andy Graham (23:29.176)

Tenants are still relatively speaking, walking home with much less every single month than they were just several years ago. And it really does have an impact. It really does come through. So we just need to be mindful that businesses are still struggling at the minute. It's very expensive to borrow money. People have less money in their back pocket and luxuries tend to go out the window and people do need to sometimes cut back. So when you're planning and you're putting certain things into your projects and really pushing the rents.

Just be mindful that if you push things too far, it could actually be a bit of a risk for you. You've got to make sure that you get that intersection between what you pay for everything, your property and all of your refurbishment costs and what you get from a tenant, what you can consistently rent for. It's really, really important you get that intersection just right. I think it could be quite easy to overspend on the property and then actually not get that higher rent that you want at the end because of the affordability challenges, despite the fact that I do think rents are going to continue to go up this year. So just be careful, just be mindful. That's all I'm saying.

So there we go. Those are my best sort of guesses for the year, guys. Look, I think there's a mix of opportunities and a mix of risks this year. I think house prices are generally predicted to rise and I think that they will. I think rents certainly are going to rise this year and I think that we can plan for that as well, which is great. That's a positive for us. I think some of the regulatory changes, we know they're coming. We're going to see some of the impacts of changes to stamp duty and capital gains tax that Labour brought in at the end of 2024 start to wash through. I think that is going to stifle growth a little bit for us as an economy. But look, I think if you're strategic and if you're focused and you know your product and your market really, really well, I think that this year does present, generally speaking, just a better opportunity than last year. 

So my advice is start planning. Make sure you know exactly what you are aiming for this year and then note down and write down exactly how you are going to achieve it. What steps are you going to take? What action are you actually going to take to make sure that you hit your goals in 2025? Don't think there's a property crash coming despite all the noise that the same people in stripy shirts have been making for several years now. Remember to look at the facts, not listen to the hype. Look, really interested to hear what you think about this. So come over to the HMO community and share your thoughts. Tell me what you think this year.

Andy Graham (25:52.398)

will look like. Give me your predictions for the rental market, property prices, the economic outlook. If you haven't already joined, that's our free community over in Facebook. It's a great place to find guidance, advice, support, and really important and really useful conversations about this stuff and a whole lot more that'll help you grow your business. Now, of course, if you want to level things up this year, if you really do want to change things this year, perhaps you want to get out of your job. Perhaps you want to get to that 10,000 pound income from property every single month. 

Maybe you just want one or two properties to supplement your pension, whatever it is. Make sure you go and check out the HMO roadmap. That is the vault of over 400 resources that we have built over the last three or four years. It's built by the community, for the community. It's not just my opinions, my experiences. Everybody's unbiased, unfiltered, covering a range of topics and lessons, everything you could possibly know and need. 

Social HMOs, student HMOs, how to find and fund deals, how to refurbish deals, how to manage tenants, optimise and drive efficiently through your business so that you get your time back. We've got over 70 case studies from community members in there. We've got the deal stacker, dozens and dozens of downloadable templates and resources that I've been using in my business for years to save you hours and hours of time trying to generate yourself and save you thousands and thousands of pounds paying to get done by somebody else. 

Trust me. It is an absolute no brainer if you want to build your HMO property business this year. It'll cost you less than a price of a cup of coffee every single day. And if you put that into the context of what you're doing, buying HMOs, buying properties, it's costing hundreds of thousands of pounds. It is an absolute no brainer. And I wish it existed when I was just getting started because I really would have achieved 10 times the amount in a 10th of the time. 

And look, it gets even better because we have today, the 1st of January launched a huge sale. can now access everything we've got to offer inside the HMO roadmap at a 20% discount. It's a huge sale. It's only going to be on for a very short period of time before prices go up. So take advantage of it now before it is too late. 

That's it guys. I want to wish you the very best luck for 2025. I'm here. I'm supporting you. I'm cheering you on and I'll do anything I can to help you along the way. I promise I'll keep turning up week in week out to give you my

Andy Graham (28:17.294)

best practice advice, knowledge, experience and opinions on the show to help you in whatever way I possibly can. And wish me luck too. This year is an unknown for me. Gemma and I are expecting our first baby soon. We're so excited, but we know it's going to be a huge challenge for us, not just in its own right, but also balancing everything else alongside it. So I'm excited, but I'm also anxious and nervous. So wish me luck. And if you've got any advice on that, please, please.

Please let me know as well, but I'm going to be here. I'm going to keep turning up. I've cut back on a few things this year. I'm moderating some of my activity in business because I really want to enjoy this period with our new baby. And look for me, this is what it's all about. It's about building businesses to do the things in life that we really, really want to do and making sure that we've got the time and the flexibility and freedom and the choice to spend it doing the things that are most important to us. And this is absolutely one of those things for me. 

So if you see or hear a little bit less from me on social and things like that, that's why I'm just taking a bit of time with Gem and our new baby. So she's not here yet, but hopefully later in January, she arrives safely. 

That's it for today's episode guys. Thank you so much for tuning in. And of course, don't forget that I'll be right back here in the very same place next week. So please join me then for another installment of the HMO podcast.