Why Manchester and Liverpool HMOs Are a Bubble: Where Smart Money Went in 2026
May 1, 2026
For years, Manchester and Liverpool have been sold to investors as the obvious places to buy HMO property. Big city names. Large student populations. Strong transport links. Regeneration stories. Growing rental demand.
On paper, it sounds attractive.
In reality, the HMO market in both cities has moved into dangerous territory. When every developer, sourcer, deal packager and property educator is pointing investors toward the same postcodes, the opportunity does not stay hidden for long. It becomes crowded. It becomes expensive. It becomes noisy. Eventually, it starts to look less like a smart investment market and more like a bubble.
That is exactly why we have never had any want or desire to operate in Manchester or Liverpool.
After more than 34 years of developing and managing HMO properties in South Yorkshire, we have seen this pattern many times. The market gets hyped. Investors rush in. Sourcers start pushing every available property as an “HMO opportunity”. Developers cut rooms tighter. Management quality drops. Tenant choice increases. Then landlords discover the real problem: owning an HMO in a famous city is not the same as owning a well-performing HMO investment.
The direct answer for investors
Manchester and Liverpool HMOs are not automatically bad investments. However, many areas have now approached bubble status because too many investors are chasing the same opportunity at the same time. That creates higher purchase prices, more competition, more tenant choice, more planning pressure and thinner margins.
The smarter money in 2025 has been looking away from over-promoted trophy cities and toward properly developed, fully managed HMO stock in stronger regional micro-markets such as South Yorkshire.
That is where our focus remains.
View our available South Yorkshire HMO investment stock here: www.footforwardproperties.co.uk/hmo-for-sale
Why Manchester and Liverpool became HMO hotspots
It is easy to understand why Manchester and Liverpool attracted so much investor attention.
Both cities have large populations, major universities, strong employment bases, good transport connections and well-known regeneration stories. For early movers, there were genuine opportunities. Investors who entered the right streets at the right time, bought at the right price and managed their properties properly could do well.
However, the problem with a popular market is that popularity changes the numbers.
Once a location becomes the default recommendation, everyone starts chasing it. Manchester and Liverpool have been talked about so heavily in property circles that the opportunity has become crowded. Every investor webinar, sourcing group and “hands-off property” pitch seems to mention the same cities. As a result, investors are no longer just competing with ordinary buyers. They are competing with other HMO investors, developers, sourcers, local landlords and out-of-area buyers who have all been told the same story.
That level of attention can distort a market.
The bubble problem: everyone is chasing the same stock
An HMO market becomes dangerous when the investment case depends more on hype than on local operational reality.
In Manchester and Liverpool, many investors have been bombarded with the idea that demand is endless. Yet HMO demand is never just about the city name. It is about the exact street, the quality of the property, the room sizes, the bills model, the parking, the management, the tenant profile and the number of competing rooms nearby.
This is where many investors get caught out.
You can buy a property in a strong city and still own a weak HMO. You can also buy in a famous postcode and find yourself fighting for tenants against numerous other HMO properties nearby. In some micro-locations, it can feel like you are competing with 10 other HMOs on or around the same streets, all trying to attract the same tenant pool.
That is not a comfortable position for an investor. It pushes landlords into longer void periods, rent reductions, more incentives, more tenant churn and higher management pressure.
Article 4 is a signal investors should not ignore
Planning restrictions are often introduced when councils start seeing too much pressure from HMO concentration. Manchester City Council states that its Article 4 Direction removes permitted development rights for changing a C3 dwellinghouse into a C4 HMO across the city, meaning planning permission is required for that change of use.
Liverpool City Council also confirms that, within its Article 4 area, converting a property into an HMO for three or more people requires planning permission.
For investors, Article 4 should not simply be seen as a planning inconvenience. It is a market warning.
It usually tells you that the council has already identified pressure from HMO concentration. In practical terms, it means the easy conversion model becomes harder. It also means inexperienced investors may start chasing existing HMOs without fully understanding whether those properties are compliant, properly configured, correctly licensed or genuinely attractive to tenants.
That is where cheap stock can become very expensive.
Saturation kills the part investors actually need: tenant demand at the property level
A lot of investors talk about rental demand at city level. That is too broad.
The real question is not, “Is there rental demand in Manchester?” or “Is Liverpool a strong rental city?” The better question is, “Will this exact HMO, on this exact street, outperform the other rooms available nearby?”
That is where saturation becomes a problem.
When too many similar HMOs sit close together, tenants gain choice. Choice is good for tenants, but it exposes weak landlords very quickly. If one HMO has small rooms, poor communal space, no ensuite provision, weak parking, poor maintenance or slow management, tenants can simply move to a better property nearby.
In a saturated market, average rooms struggle.
Well-developed rooms still stand a chance, but the investor must ask whether the yield properly reflects the risk, the purchase price, the refurbishment cost and the level of competition. Often, once the full picture is understood, the deal no longer looks as strong as the brochure suggested.
Why we have stayed focused on South Yorkshire for over 34 years
We have spent more than 34 years developing and managing HMO properties in South Yorkshire because we understand the market at ground level.
That experience matters.
We are not interested in chasing the latest fashionable city. We are not trying to follow whatever location is being shouted about the loudest online. Our model has always been built around careful stock selection, proper development, tenant-focused layouts, long-term management and sustainable investor outcomes.
That is why we have never wanted to operate in Manchester or Liverpool.
The competition and saturation in those markets goes against the fundamentals we look for. We prefer areas where the investment case is driven by practical tenant demand, sensible entry prices, strong local employment, good transport connections and the ability to create better living spaces without being trapped in an overcrowded HMO race.
Where smart money went in 2025
In 2025, smarter HMO investors started asking better questions.
They were no longer simply asking which city had the biggest name. Instead, they were asking:
- Where is the competition manageable?
- Where can the property be properly optimised?
- Where is there genuine working tenant demand?
- Where can the investment be managed professionally from day one?
- Where is there still room for long-term capital appreciation?
- Where can I avoid being one of 20 investors chasing the same postcodes?
For many investors, that led them toward South Yorkshire.
South Yorkshire continues to benefit from major investment, employment growth and infrastructure attention. The UK Government previously named South Yorkshire as the first UK Investment Zone, with a focus on advanced manufacturing and growth around regional strengths. In Doncaster specifically, the reopening of Doncaster Sheffield Airport has also been backed with a £30 million devolved funding investment, with the project positioned as a major economic boost for the region.
For HMO investors, these wider economic factors matter because good tenants need employment, transport, affordability and quality housing. South Yorkshire offers that combination without the same level of HMO hype seen in Manchester and Liverpool.
Why fully managed South Yorkshire HMOs make more sense for serious investors
A strong HMO investment is not created by buying any cheap house and filling it with as many rooms as possible.
It requires the right property, the right layout, the right refurbishment, the right compliance, the right tenant profile and the right management structure. This is especially important now, as the market continues to move away from amateur landlords and toward proper operators.
Our South Yorkshire HMO investments are built around that reality.
We handle the process end to end, fully in-house. That means investors are not left trying to manage builders, licensing, compliance, furnishing, tenanting, maintenance and day-to-day management separately. The entire model is designed to create a properly developed, properly managed HMO investment from the beginning.
That matters because HMO investment is not passive when done badly. It only becomes truly hands-off for the investor when the operator behind it has the experience, systems and local knowledge to manage the property properly.
The danger of following the crowd
Following the crowd often feels safe because it gives investors confidence. If everyone is talking about Manchester and Liverpool, it can feel like those markets must be the safest choice.
However, property investment rarely rewards investors for arriving late to an overcrowded trend.
By the time every sourcer is pushing the same area, the early advantage has often gone. Purchase prices may have risen. Planning may have tightened. Tenant expectations may have increased. Competition may have multiplied. Then, when the market becomes harder, inexperienced landlords discover they bought into the story rather than the fundamentals.
That is the risk with Manchester and Liverpool HMOs.
The city name may still be strong, but the HMO opportunity is not what many investors are being told it is.
What investors should look for instead
Investors should focus less on the city name and more on the operational strength of the investment.
A better HMO investment should have a clear tenant profile, strong room standards, sensible communal space, good compliance, proper management, durable local demand and realistic yield assumptions. It should also be developed by people who understand the market because they have lived through different cycles, not just people who are chasing the latest investment trend.
That is where experience becomes a real form of investor protection.
After 34 years in HMO development and management, we know that long-term performance comes from proper stock selection and proper operation. Not hype. Not shortcuts. Not selling investors whatever location is easiest to market.
Why South Yorkshire is not just an alternative, it is a strategy
South Yorkshire offers investors something different.
It is not being sold on the same overused trophy city narrative. Instead, the investment case is based on affordability, employment access, regeneration, tenant demand and the ability to develop high-quality shared housing in carefully selected locations.
For investors who want long-term income, sensible capital growth potential and full management support, that is a much healthier foundation.
Manchester and Liverpool may still attract attention, but attention alone does not protect your investment. In fact, too much attention can be part of the problem.
View available South Yorkshire HMO stock
If you are looking at Manchester or Liverpool HMOs because that is what every sourcer keeps sending you, it may be time to take a step back.
Ask whether you are seeing a genuine investment opportunity, or whether you are being pushed into an overcrowded market that has already approached bubble status.
At Foot Forward, we have spent over 34 years developing and managing HMO properties in South Yorkshire. We know the streets, the tenant demand, the layouts, the compliance requirements and the management standards needed to make HMO investments work properly over the long term.
View our available South Yorkshire HMO investment stock here: www.footforwardproperties.co.uk/hmo-for-sale
FAQ: Manchester, Liverpool and South Yorkshire HMO investment
Are Manchester HMOs still a good investment?
Some Manchester HMOs may still perform well, but investors need to be extremely careful. Manchester has citywide Article 4 restrictions for C3 to C4 HMO conversions, and many areas are highly competitive. The deal must be assessed at street level, not city level.
Are Liverpool HMOs oversaturated?
Some parts of Liverpool have seen significant HMO concentration, which is why Article 4 controls already apply in defined areas. Investors should not assume that a Liverpool HMO is strong just because the city has a large rental market.
Why are investors moving away from Manchester and Liverpool HMOs?
Many investors are concerned about rising competition, tighter planning rules, higher purchase prices and the number of similar HMO rooms competing for the same tenants. These pressures can reduce performance, especially for average or poorly managed properties.
Why is South Yorkshire attractive for HMO investment?
South Yorkshire offers a more grounded investment case. It has strong employment links, major regional investment, affordable property compared with many trophy cities and practical tenant demand. For investors, the key advantage is being able to access properly developed and fully managed HMO stock without chasing overcrowded markets.
What makes Foot Forward different?
Foot Forward has over 34 years of HMO development and management experience in South Yorkshire. Everything is handled end to end and fully in-house, from development through to ongoing management, giving investors a more controlled and experienced route into HMO property investment.