Property investors looking beyond the capital for the next opportunity

“While headlines over the coming months are likely to be dominated by the general election, interest rate cuts and the ongoing cost of living crisis, these factors don’t seem to be jeopardising investors’ upbeat mindset”
– James Sproule – Handelsbanken

Handelsbanken’s latest ‘Property Investor Report’, based on insights from UK property investors with an average of 35 properties each, found that the East of England was cited as the most attractive region for property investors over the next 12 months (26.5%), closely followed by North East & Cumbria (24.5%), North West (22%) and South East (21.5%), with respondents appearing to focus on areas with higher yield characteristics, rather than those with historically strong demand.

Last year, London was the most popular investment hotspot, while this year, it has dropped to fifth position with 21% – on level-pegging with the East Midlands. Support for the South East has also fallen this year, compared to last when it scored 26%.

Market outlook

The research also found that 62.5% plan to grow their portfolio in the year ahead. 27.5% will maintain their portfolio’s current size, and just 8.5% aim to exit the market completely.

70.5% of those looking to buy more properties want to diversify their portfolios geographically and sectorally, with, as previously mentioned, the East of England leapfrogging London to become the most attractive region, and residential flats seen as the most attractive property type by investors.

Valuations expected to climb

An overwhelming majority of respondents (81%) expect the value of their portfolio to increase over the next 12 months, with nearly a third (31%) believing it will grow by more than 20%, and nearly 50% expecting a slight uptick of around 5%. Optimism was highest in Wales, with 59% of respondents expecting to see a large upswing, the highest across the UK.

James Sproule, UK Chief Economist, at Handelsbanken said: “While headlines over the coming months are likely to be dominated by the general election, interest rate cuts and the ongoing cost of living crisis, these factors don’t seem to be jeopardising investors’ upbeat mindset.”

“The adjustments to capital valuations, often masked by inflation, as well as increases to rents, have resulted in property once again delivering a premium over gilt yields – and opened up the potential for attractive opportunities as the economic recovery progresses.”