Clearer valuation basis and HMO flags on every property

We’re always looking for ways to make the platform easier to use and to give investors as much clarity as possible.

After the recent overhaul of the Property details page and the introduction of Hometrack valuations, one message came through clearly: you appreciate the better tools but you want clarity on which valuation metrics you’ll see for each property — and why.

Today’s release focuses on exactly that. It adds more summary information so you don’t have to dig through every tab, and it explains the logic behind when we show Hometrack, when we show Land Registry House Price Index (HPI), and when we deliberately don’t.

Registered HMOs: now clearly labelled

First, you’ll now see exactly which properties are Registered HMOs.

A Registered HMO (House in Multiple Occupation) is a property that meets the legal definition of an HMO and has an HMO licence from the local authority. In broad terms, this usually means a property occupied by multiple unrelated tenants sharing facilities, with specific rules around safety, standards and management.

Many of our supported living properties may look like HMOs — multiple people living in one building — but when they are operated by Registered Providers, such as housing associations, they are often exempt from the HMO licensing regime even though the layout may appear similar. That distinction matters, so we now show it clearly.

On the Property details page you’ll now see “(Registered HMO)” displayed below the property type whenever a property holds a formal HMO licence.

Because licensed HMOs are specifically authorised and set up for multi-occupancy, they can be particularly attractive to specialist HMO investors who value ready-to-operate, compliant assets — especially in areas where new licences or permissions are harder to obtain. That doesn’t mean every licensed HMO is automatically worth more than an equivalent house, but it does explain why licence status is an important piece of information to show.

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Two valuation lenses: bricks and mortar vs investment basis

We’re also making a clearer distinction between the two main ways RICS valuers look at properties.

Bricks and mortar basis

Most of our RICS valuations are on a bricks and mortar basis. In plain English, this means the valuer is asking: what would this property be worth based largely on comparable sales of similar buildings in the local market?

The emphasis here is on the physical asset — condition, location, size, layout and comparable residential evidence — rather than on a specific lease or income stream.

Investment basis

For blocks of flats and HMOs, valuations are typically carried out on an investment basis. In these cases the valuer is asking a different question: what is this property worth as an income-producing investment, given the rent, lease terms, tenant covenant and yields available in the market?

This valuation is focused on:

• Current and expected rent
• Lease length and break options
• Tenant strength
• Market yields for similar assets

The value is then derived by capitalising the income rather than simply comparing bricks and mortar.

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Why HMOs and blocks are typically investment basis — and why they can value higher

Typically, most HMOs and most blocks of flats in our portfolio are valued on an investment basis, because they are clearly being held and operated as income-producing assets rather than standard single-let houses.

For HMOs and multi-let blocks, the aggregate rent can be significantly higher than you’d expect from a single-family letting of the same building. An investment valuation that capitalises this higher income can therefore come out above the simple bricks-and-mortar figure. That’s why you’ll often see HMO valuations that are higher than the underlying sale price of a similar non-HMO house — the valuation is reflecting the income stream, not just the building itself.

Creating a compliant HMO usually also involves additional capital spend and regulatory work – for example fire doors, upgraded alarm systems, emergency lighting, extra bathrooms or kitchens, and meeting local licensing standards – which a standard single‑let would not require. Those works help support the higher rents and the investment‑basis valuation, but they also mean the economics are different from a like‑for‑like single‑family house.

In some of our reports, the valuer has done both:

• An investment value based on income, and
• A lower bricks and mortar figure based on standard sales evidence

Because this distinction is important, we now show — directly next to the RICS valuation amount in the Property details and Valuation sections — which basis the displayed figure uses: “bricks & mortar basis” or “investment basis”.

If you open the full valuation report in the Documents section, you may sometimes see that the report itself includes both bases; the Property details page now tells you clearly which one you are looking at in the summary.

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When you’ll see Hometrack and HPI — and when you won’t

Hometrack is an automated valuation model designed for mainstream residential property. It uses a large amount of transaction and mortgage valuation data, along with details we hold about the property itself, to estimate a current residential value. This makes it a good fit when a property is bought and valued on a bricks-and-mortar basis, but it is not designed to price income-led investment deals.

Similarly, the UK House Price Index (HPI) tracks changes in residential sale prices, so for bricks-and-mortar valuations it gives a broad indication of how the underlying asset value has moved since we bought the property. However, for investment-basis assets capital values are influenced much more by other factors such as interest rates, rental levels, tenant demand, yields and broader investment market sentiment, which makes HPI less relevant.

So our new rule is deliberately simple:

• We only display Hometrack valuations and HPI changes for properties bought on a bricks-and-mortar basis that are not blocks of flats.
• In practice, this means investors will generally see Hometrack valuations and HPI changes for single houses and similar properties with bricks-and-mortar RICS valuations. You will not see Hometrack valuations or HPI changes for most HMOs or blocks of flats, which are typically valued on an investment basis.

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Summary matrix: what you’ll see for each property

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The simple rules in one place

Putting it all together:

• Registered HMO label – Shown below the property type when the property has an HMO licence.
• RICS valuation basis – Every property now clearly shows whether the displayed RICS figure is bricks & mortar basis or investment basis.
• Land Registry HPI change – Shown only when the RICS valuation is on a bricks and mortar basis.
• Hometrack valuation – Run and shown only for properties bought on a bricks-and-mortar basis that are not blocks of flats.

Our aim with all of this is simple: give you more useful summary information upfront, reduce the need to dig through every document, and be transparent about why different property types show different valuation metrics.

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Two legacy exceptions to these rules (Loans 178 and 179)

There are two legacy properties on the platform — Loans 178 and 179 — where the valuation picture is slightly different.

These properties were originally acquired and converted into HMOs by our partner NEPI, who undertook significant capital works to create multi‑occupancy layouts. Economically, they are HMO‑style investment assets rather than standard single‑let houses.

However, the RICS reports for those properties were prepared on a bricks‑and‑mortar basis, using comparable sales rather than capitalising the enhanced HMO income. As a result, the reported RICS values are lower than the total project cost and do not fully reflect the income profile that NEPI’s conversion spend was designed to deliver.

Because the RICS reports for Loans 178 and 179 were prepared on a bricks‑and‑mortar basis, the Land Registry HPI change is still shown for these properties as a broad indicator of underlying residential market movement, in line with the approach described above. However, given the HMO conversion works and income profile, we do not treat HPI as a full investment valuation for these loans and therefore do not overlay a Hometrack estimate.

In practice, this means we treat Loans 178 and 179 as HMO‑style investment assets for valuation display purposes: investors will see the bricks‑and‑mortar RICS figures alongside the HPI change, but no Hometrack valuation, because we believe a standard residential AVM would not give a fair or meaningful indication of value in these specific cases.

If you have any questions about how these changes affect a specific property you hold, or if you’d like us to walk through a particular example, please get in touch and we’ll be happy to help.