At Foot Forward Properties, we have over 34 years of experience in developing and then managing HMO properties. As I am sure the reader will understand, this gives us a very practical view of the market, because we speak to investors from all over the UK every week. We hear what they are looking for, what they are trying to avoid, which areas they are comparing, and where they believe the next strong HMO investment locations will be.

Over the last three years, one shift has become much clearer. More southern investors are now looking north for better investment opportunities. This is not only about cheaper property prices. It is about a combination of stronger yields, better entry points, rising rents, major employment growth, transport connectivity, regeneration, and the ability to buy in areas that still have room for sensible, well-managed HMO accommodation.

For many investors, the question in 2026 is no longer simply “should I invest in HMOs?” The better question is “where should I invest in HMOs without entering an overcrowded market?”

From our experience on the ground, the band of South Yorkshire has become the golden zone for HMO investment. Doncaster, Rotherham, Barnsley, Sheffield, and the surrounding commuter and employment corridors all sit in a region with the fundamentals that HMO investors should be studying carefully. This is especially true for investors who want something more balanced than a high-cost southern purchase or an oversupplied major city market.

Why HMO Investment Locations Are Changing in 2026

The HMO market has matured. A decade ago, many investors could enter a well-known city, convert a suitable property, and benefit from strong tenant demand with less competition than we see today. That market has changed.

Tenants now expect better quality accommodation. Councils are more active. Planning restrictions are more common. Finance is more expensive than it was during the ultra-low interest rate years. Utilities, compliance, insurance, maintenance, and management costs all need to be taken seriously.

That means the best HMO investment areas in 2026 are not always the cities that were most talked about five or ten years ago. The strongest opportunities are increasingly found in areas where demand is growing, prices remain sensible, competition is not yet overheated, and the local economy gives tenants a clear reason to rent.

The Shift From Southern Investors Looking North

We speak with investors from all over the UK, and one pattern has become much clearer over the last three years. Investors from London, the South East, and other southern markets are now looking further north for better HMO opportunities.

The reason is easy to understand. In many southern areas, the purchase price is simply too high for the return to make sense. Even where rental demand is strong, the entry cost can reduce yield, increase borrowing pressure, and leave less room for refurbishment, compliance, and long-term maintenance.

Northern areas can offer a more balanced investment case. The strongest locations combine lower entry prices with rising rents, employment-led demand, regeneration, and better long-term growth potential. This is why South Yorkshire is now attracting more attention from serious HMO investors.

Why South Yorkshire Is the Golden Zone for HMO Investment

South Yorkshire has several advantages that are difficult to ignore. It offers relative affordability, strong transport links, major employment locations, logistics growth, regeneration, and access to several cities and towns within a compact region.

For HMO investors, this matters because shared accommodation works best where there is a genuine reason for tenants to live in the area. A strong HMO market is rarely built on one demand driver alone. It is usually supported by several layers of demand, including young professionals, key workers, logistics staff, contractors, healthcare workers, airport-related workers, manufacturing staff, and people relocating for work.

South Yorkshire has many of these demand drivers. In our view, that is why the region deserves serious attention in 2026.

Rising Rents Support the South Yorkshire Investment Case

The wider rental market also supports the case for South Yorkshire. ONS data shows that average private rent in Doncaster rose from £647 in March 2025 to £684 in March 2026, which is a 5.7% annual rise.

HMO room rents are different from whole-property rents, but wider rental movement still matters because it shows pressure across the local rental market. When rents rise in the wider private rented sector, it often reflects a shortage of available accommodation, stronger tenant demand, or both.

For investors, the key is not just whether rents are rising. The key is whether rents are rising in an area where the purchase price still allows a sensible investment model. This is where Doncaster and the wider South Yorkshire area can be particularly interesting.

Savills Forecasts Strong Capital Appreciation for Yorkshire and The Humber

Capital growth forecasts also strengthen the regional story. Savills’ Mainstream Residential Forecasts 2026 to 2030 placed Yorkshire and The Humber among the strongest UK regions for expected house price growth.

Forecasts are never guarantees, but they are useful when looking at long-term investment fundamentals. HMO investors should not only focus on monthly cash flow. A good investment should also have a sensible long-term capital growth story behind it.

This is one of the reasons South Yorkshire is becoming so attractive. It gives investors the possibility of income, affordability, tenant demand, and long-term growth potential in the same regional band.

The HMO Bubble in Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham

A lot of places that were once fantastic for HMO investment are now becoming an increasingly large bubble. Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham are good examples.

These cities became popular for good reasons. They had strong student populations, growing professional tenant demand, major employers, large hospitals, good transport, and an established rental culture. For many years, they were seen as some of the best HMO investment locations in the UK.

However, when too many investors follow the same story, the market starts to change. What was once an opportunity can become crowded. More investors enter. More properties are converted. More rooms compete for the same tenants. Purchase prices rise. Refurbishment standards increase. Tenant expectations improve. Councils respond with tighter controls. Eventually, the original yield advantage can be reduced.

This is the bubble many HMO investors now need to understand. It is not always a house price bubble in the traditional sense. It is often a competition bubble, a regulation bubble, and a margin-compression bubble.

Why These Former HMO Hotspots Are Becoming Harder

In many of these larger cities, investors are now facing several challenges at the same time.

The first is oversaturation. Some streets and postcodes have a very high number of shared houses. This can make it harder to stand out unless the property is finished to a high standard and managed very well.

The second is stronger competition. New investors are often competing against experienced local landlords, professional HMO operators, and larger portfolios that already understand the market.

The third is regulation. Article 4 Directions are now common in many major HMO cities. In simple terms, Article 4 can remove permitted development rights, which means planning permission may be needed before a standard residential property can be converted into an HMO.

The fourth is cost. In the most popular cities, purchase prices can be much higher than in nearby secondary towns and regional growth areas. When the acquisition cost increases, investors need stronger rents simply to protect the same yield.

The fifth is tenant choice. In oversupplied areas, tenants can compare many rooms at once. That often means investors need to spend more on furniture, design, bills, broadband, communal space, and management to remain competitive.

Why a Popular City Is Not Always the Best HMO Investment

A city can be popular and still be a difficult place to invest. This is an important distinction.

Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham are not poor cities. They are major UK cities with strong economies and large rental markets. The issue is that many HMO investors are arriving late to markets that have already absorbed years of investment demand.

When everyone is looking at the same postcodes, the deal quality can weaken. Investors may pay more for the property, spend more on refurbishment, face more planning restrictions, and compete harder for tenants. That does not mean there are no good deals left, but it does mean investors need deeper knowledge, stronger due diligence, and more caution.

This is why we believe investors should not simply ask which cities are famous for HMOs. They should ask which areas still have the right balance of affordability, demand, growth, and manageable competition.

Why Doncaster Stands Out in 2026

Doncaster is one of the strongest examples of why investors are looking more seriously at South Yorkshire. It has affordability, connectivity, employment growth, major regeneration, and a central location that is hard to replicate.

One of the strongest demand signals is migration. Doncaster has been reported as the UK city Brits were most eager to move to, based on internal migration data showing strong net movement into the city.

That does not mean every new resident will rent an HMO room. However, it does show that Doncaster is gaining attention as a place to live. For investors, population movement matters because it can support rental demand, local services, and long-term confidence.

Doncaster’s Irreplaceable Geographical Position

Doncaster has an irreplaceable geographical central location. It sits close to major road and rail routes and gives access across South Yorkshire, Yorkshire, the Midlands, London, and the North.

This central position supports a broader tenant pool because Doncaster is not dependent on one university, one employer, or one town-centre economy. A strong HMO location should ideally have multiple reasons for people to live there. Doncaster has that through transport, employment, affordability, logistics, healthcare, regeneration, and regional access.

For HMO investors, this matters because tenant demand should be practical. People need to live close to work, transport, amenities, and affordable housing. Doncaster offers that combination in a way many investors are only now beginning to properly understand.

Employment and Development Are Driving Demand

Doncaster’s investment case is not only about lower house prices and rising rents. It is also about the employment and development pipeline around the city.

GatewayEast is one of the most important development stories in the region. The project is connected to the South Yorkshire Advanced Manufacturing Investment Zone and includes major development potential around the Innovation Quarter and Doncaster Sheffield Airport.

This matters because HMO demand often follows employment. When people move for work, contracts, shift patterns, logistics jobs, airport-related jobs, manufacturing, or regional projects, many want flexible, furnished, all-inclusive accommodation. That is exactly where well-managed HMOs can serve a genuine housing need.

Why Doncaster’s Affordability Still Matters

Affordability is one of Doncaster’s clearest advantages. Compared with many larger cities, Doncaster still offers a more accessible entry point for investors who want to build a sustainable HMO portfolio.

For HMO investors, lower entry prices can make a major difference to the overall investment model. A lower purchase price can give investors more room to refurbish properly, improve layouts, meet compliance standards, furnish to a better level, and still aim for a sensible yield.

In more expensive cities, investors can sometimes spend too much on acquisition and then struggle to make the numbers work after finance, utilities, council tax, insurance, management, maintenance, licensing, and voids are included.

This does not mean every property in Doncaster is suitable for HMO use. Street selection, tenant demand, planning position, licensing, layout, fire safety, room sizes, parking, amenities, transport, and management all matter. However, Doncaster’s entry prices do give investors a stronger starting point than many larger and more saturated cities.

Best Areas for HMO Investment in 2026

1. Doncaster and the Wider South Yorkshire Corridor

Doncaster is one of the most compelling HMO investment locations in 2026 because it combines affordability, rising rents, strong connectivity, employment growth, and long-term regeneration. It also sits within the wider South Yorkshire band, which we believe is one of the strongest zones for HMO investment in the UK.

For investors who want to look at current opportunities, visit our page here: HMO properties for sale

2. Rotherham, Barnsley, and South Yorkshire Commuter Areas

Rotherham and Barnsley can offer value, access to employment, and good regional connectivity. These areas should not be judged only by town-centre headlines. Investors need to look at micro-locations, transport links, employer access, local room supply, and the quality of competing accommodation.

3. Sheffield, With Careful Micro-Location Selection

Sheffield remains a major regional city with strong employment, universities, hospitals, and professional demand. However, investors must be much more careful than they were ten years ago. Some areas have high HMO competition, and planning rules need to be understood before purchase.

Sheffield can still work, but it rewards local knowledge and punishes assumptions.

4. Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham, But Only With Strong Due Diligence

These cities can still produce good HMO investments, but they are not easy markets. They are now more mature, more competitive, more regulated, and in many areas more expensive to enter.

The investor who simply buys in one of these cities because it has a strong name may be taking on more risk than they realise. In 2026, the better approach is to look beyond the obvious names and ask whether the local numbers still work after all real costs are included.

5. Secondary Towns With Employment, Not Just Cheap Property

Some of the best HMO opportunities in 2026 may come from secondary towns that have strong employment drivers, good transport, and affordable property.

The key is not to chase the cheapest house. The key is to find areas where tenants have a clear reason to rent and where the finished HMO can be managed professionally.

What Makes a Good HMO Investment Area in 2026?

A good HMO investment area should have more than one demand driver. Investors should look for employment, transport, affordability, rental pressure, regeneration, and a manageable level of competition.

A market that relies only on students, or only on one employer, can be more vulnerable. The strongest HMO locations usually have a broader tenant base.

A strong area should also allow investors to create a good standard of accommodation. Tenants now expect better rooms, better furnishings, reliable Wi-Fi, clean communal areas, safe kitchens, proper fire safety, and responsive management.

The old model of buying cheaply and offering basic shared accommodation is becoming weaker every year. In 2026, quality matters.

Why Experience Matters More Than Ever

We have been developing and managing HMO properties right here for over 34 years now. That experience matters because HMO investment is not just about buying a property and renting rooms.

It is about knowing which streets work, which layouts are practical, what tenants actually want, how to manage shared living, how to deal with compliance, and how to protect long-term performance.

Many investors come to us after looking at headline yields online. A headline yield can be useful, but it is only the start. The real question is whether the property can perform after refurbishment, furniture, management, compliance, maintenance, utilities, insurance, finance, council tax, voids, and tenant turnover are all considered.

That is where local experience becomes valuable. A property can look good on a spreadsheet and still be difficult to run. Equally, a property that looks ordinary at first glance may be in a strong micro-location with the right layout and tenant demand.

FAQ: Best Areas for HMO Investment in 2026

What is the best area for HMO investment in 2026?

In our view, South Yorkshire is one of the strongest areas for HMO investment in 2026, with Doncaster standing out because of affordability, connectivity, employment growth, rising rents, and regeneration.

Is Doncaster a good place for HMO investment?

Doncaster has a strong case for HMO investment because it offers lower entry prices than many larger cities, rising rents, major employment drivers, central UK connectivity, and a growing relocation story. Investors still need careful due diligence on planning, licensing, property layout, and street-level demand.

Why are southern investors looking north for HMOs?

Many southern investors are looking north because purchase prices can be lower, yields can be stronger, and some northern areas have better room for growth. The strongest northern opportunities are usually in locations with real employment, transport, and rental demand, not simply the cheapest property prices.

Are Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham still good for HMOs?

They can be, but they are much more competitive than they used to be. Many areas now have higher entry prices, more HMO operators, more tenant choice, tighter regulation, and Article 4 restrictions.

These cities were once fantastic HMO markets, but many parts of them are now becoming an increasingly large bubble of competition, regulation, and compressed returns. Investors should not avoid them automatically, but they should enter with stronger due diligence and realistic expectations.

Why is Article 4 important for HMO investors?

Article 4 can remove permitted development rights, meaning planning permission may be needed to convert a family house into a small HMO. This can affect timescales, risk, cost, and whether a property is suitable for an investor’s strategy.

What should investors look for before buying an HMO?

Investors should look at local demand, employment, transport, existing HMO supply, planning rules, licensing requirements, achievable room rents, refurbishment costs, management costs, and long-term resale value. A good HMO investment should work as both an income-producing property and a long-term asset.

Where Should HMO Investors Look in 2026?

The best areas for HMO investment in 2026 are not necessarily the areas that were most popular five or ten years ago. The market has changed. Investors are more careful, tenants expect better accommodation, councils are more active, and competition in the traditional HMO cities has increased.

Manchester, Leeds, Liverpool, Newcastle, Birmingham, and Nottingham were once viewed as some of the strongest HMO investment locations in the UK. In many areas, they are now becoming crowded markets where investors face higher purchase prices, stronger competition, more planning controls, and thinner margins.

South Yorkshire now has a very strong case, and Doncaster sits at the centre of that opportunity. With rising rents, affordable property, strong connectivity, employment-led demand, major developments, and a regional growth story that is attracting more national attention, it deserves close attention from serious HMO investors.

At Foot Forward Properties, we have spent over 34 years developing and managing HMO properties in this market. We believe that local experience, careful due diligence, and responsible management are what separate sustainable HMO investments from speculative ones.

To view current opportunities, visit: HMO properties for sale