Why HMOs in London Aren’t a Good Investment

August 13, 2025

Here at Foot Forward we speak to plenty of property investors every single day who are based down south. Many of them are actively selling their HMO properties in London and the surrounding areas so they can reinvest in HMO investment opportunities in the north of England. It is a clear trend and the reasons behind it are very compelling.

While southern rental income might look attractive at first glance it falls short when compared to the long term wealth building potential found in the north. In areas like South Yorkshire the combination of healthy rental yields and impressive capital appreciation far outperforms what most London landlords are seeing right now.

The Illusion of High Rental Income in London

It is easy to be tempted by high rental figures. London’s rental market can generate large monthly sums but if you only focus on income you miss the bigger picture. True property wealth is built on both cash flow and capital growth.

Capital appreciation is where your portfolio gains real value over time. It is the increase in your property’s worth year on year and it compounds powerfully. This is where London is underperforming compared to the north. Even though rental income may be strong the capital growth in many parts of London is stagnating or moving at a slow pace.

Why South Yorkshire Beats London for HMO Investment

Recent figures show South Yorkshire enjoying capital appreciation of around seven percent per year. That kind of growth means a property worth £200,000 today could be worth £14,000 more in just twelve months without any additional investment. Compare that to the much lower capital appreciation rates in London and you begin to see why so many savvy landlords are moving their portfolios north.

When you combine this growth rate with the fact that HMOs in South Yorkshire and similar northern regions also produce solid rental yields you end up with an investment that delivers in two ways. You are earning strong monthly cash flow while your asset is growing significantly in value every year.

Leveraging Capital Growth for Faster Portfolio Expansion

One of the biggest advantages of investing in a high growth area is the ability to leverage your equity to fund additional purchases. When a property gains value quickly you can refinance sooner and with a larger amount releasing capital to reinvest. This allows you to scale your HMO portfolio much faster than if you were stuck with slow growth in London.

In contrast London landlords often find themselves sitting on high value properties that do not grow much year to year. The equity is locked up and it takes longer to access funds for the next investment.

Why the Best HMO Locations Are in the North

The best areas for HMO property investment are those that deliver a balance of high rental yields and consistent capital appreciation. Cities and towns across South Yorkshire offer this balance making them prime territory for long term investors. Demand for quality shared accommodation is strong driven by a combination of students young professionals and key workers.

At Foot Forward we focus on developing HMOs in these high growth northern markets because we have seen first hand how they outperform similar properties in London. Our investors enjoy monthly cash flow that rivals or beats London rental figures while also benefiting from the kind of capital growth that accelerates wealth building.

The Bottom Line

If you are serious about building wealth through property you need to think beyond just the rental figures. Capital appreciation is the engine that drives long term growth and the north is delivering far better returns in this regard than London.

HMO investments in South Yorkshire and other northern regions are offering the perfect combination of yield and growth. That is why so many southern investors are selling up and moving their money north and it is why HMOs in London are no longer the smart choice they once were.