In the face of an unprecedented living cost crisis and a looming economic downturn, the UK’s housing sector continues to go from strength to strength. New figures released by Handelsbanken indicate unwavering optimism in both residential and commercial property among investors looking to capitalise on skyrocketing demand for affordable homes and business units.
The figures from Handelsbanken suggest that almost 50% of professional landlords (those with a minimum of four properties in their portfolios) plan to invest in one or more properties over the next 12 months. Meanwhile, 35% said they would hold their portfolios at their current levels, while just 7% indicated their intention to liquidate one or more of their assets.
Handelsbanken’s first SME Landlord Survey also revealed that more than 85% of landlords are anticipating an increase in demand for residential property rentals over the coming year. Commercial property landlords also indicated optimism for the year ahead, with 63% predicting an increase in demand for commercial units.
Interestingly, 89% of the landlords who took part in the poll said they expect average rental yields to decrease slightly within the next 12 months.
Diversification is a priority for many landlords
73% of landlords indicated their intent to diversify their property portfolios going forward. Houses remain the biggest draw for landlords planning property purchases (66%), followed by 38% who plan to buy flats, 34% setting their sights on houses of multiple occupations, and 32% planning to purchase commercial retail units.
Meanwhile, London continues to gain the lion’s share of attention from landlords planning to diversify their portfolios. 53% said they intend to buy properties in and around London, followed by 40% looking to buy into the East of England, and 22% who see the East Midlands as the most attractive location to purchase new properties.
A resilient and buoyant market
Speaking on behalf of Handelsbanken, chief economist James Sproule highlighted how even the escalating living-cost crisis is having no major impact on the buoyancy of the UK property market.
“Recent house price growth shows how property has shown its resilience against economic doom and gloom and the cost-of-living squeeze,” he said.
“Landlords are anticipating that a shortage of rental properties will help keep prices buoyant, particularly as working patterns continue to adjust to the post-pandemic world and people seek to move back to big cities, particularly in popular areas such as London, which is also seen to be better placed to ride out the next series of economic challenges and opportunities.”
“Landlords went through a tough period following the COVID-19 pandemic, with residential property transactions falling by more than half and business investment contracting. But the sector has survived and is now looking forward.”
“The 2022–23 financial year is forecast to see a further softening in residential property transactions as vendors wait for the right buyer rather than accept any perception of loss in value.”
Buy-to-let investments boom
The figures suggest that, far from a decline, the withdrawal of the stamp duty holiday and lingering economic uncertainty have actually triggered a major spike in buy-to-let investment interest. Buy-to-let remains an attractive option for newcomers and established investors alike, due to the near certainty of generous rent yields and sky-high capital gains.
This is particularly true in and around London, where the latest Zoopla Rental Index pins the average monthly rent at a huge £1,698. That is more than 15% higher than the same time last year and is expected to continue climbing.
Remote and hybrid working models are sustaining high levels of demand for rental properties with private gardens and for those in proximity to public parks. While this continues as the new norm, investors will continue to set their sights on homework-friendly homes as uniquely attractive investment opportunities.