With the rise of interest rates outweighing rental income, assured shorthold tenancy investors are finding it an uphill battle to make any real profit. With the prediction of another recession approaching, the domestic tourism industry will only benefit, with people putting overseas holidays aside, the short UK city breaks will become a lot more desirable, allowing investors to make hay while the sun shines.
Investors are seeing huge profits from becoming hosts on the likes of Airbnb, using these platforms to appeal to a wider audience. Of course, this will come with more void periods and less certainty.
With so much uncertainty in the market with interest rates, nobody is sure if they will rise or fall, therefore it is important to know you’re not just buying any property in any area with this new form of investing. The most important factor with this is location, location, location!
With the 90-day rule in London, this means you can only achieve a maximum occupancy rate of 24.65%. Our investors are finding success in cities like York, with an 85% occupancy rate, Liverpool, achieving upwards of 73%, and Manchester looking to grow from 61% in 2023, with the consistently growing Salford Quays. These are all the current and up-and-coming UK hotspots for short-term rentals/serviced accommodation.
Not all investors will want to mortgage their properties and in these uncertain times, security and stability is of key importance, especially when so much capital is at risk. Year on year our Landal holiday lodges have satisfied investors with fantastic huge guaranteed rental income.
A hands-off rental guaranteed investment that generates passive income creating peace of mind that you can earn an income, essentially without having to do anything towards this. The companies involved are constantly growing and looking to dominate the market in their field, and successfully doing so, which only speaks volumes for the future of these investments.
Most up-and-coming city/location to invest
In my opinion, next year is going to be the best year for investors to take advantage of the prices in Liverpool. I have seen the city grow so much since I moved here two years ago. And with less restrictions after Covid, allowing the construction industry to move forward at a fast pace, I expect to see huge progression with the Liverpool Waters Project. According to the Land Registry, Liverpool house prices were up 13.8% compared to 12.8% recorded nationally. In the past five years, prices in the city have soared by 46%.
Investing is always about timing, so investors who have bought in Liverpool up to now have built up huge equity. After 2023, it will still be a good time to buy here, as prices will still be lower than in places like Manchester, Birmingham, and certainly London, but don’t let that thought make you hold off investing here. The earlier you add Liverpool to your portfolio, the more lucrative this will be later down the line.’
Should you invest in the 2023 property market?
Research is essential to success and generating profitable returns - as any successful investor is aware. Investing is a long-term process, and although 2022 has shown continuous instability, previous recessions have demonstrated the long-term resilience of the UK.
Through riding the wave of economic changes over a long period of time, investors will see great returns with both short and long-term investments despite recessions. The unpredictability of the economy and the impact it will have on the 2023 property market doesn't mean you need to completely alter your investment strategy, but maybe consider adapting it accordingly to take advantage of next year's trends and opportunities, to continue investing profitability in the 2023 property market.
With staycations set to rise again in popularity next year, firstly accelerated by the pandemic and then the rising cost of living in 2022, the UK holiday market is set to be worth a record high of £275 billion by 2025. 2023 would be a great time to invest in a short-term let in the UK in order to see the highest capital growth.
Additionally, as Dan pointed out, cash investments will grow in popularity as they allow investors to combat the rising interest rates of mortgages that we witnessed in 2022. Not to mention, with rising interest rates comes an increasing demand for renters choosing not to buy in 2023. According to Zoopla, demand for rental housing is up 46% and with supply being down 38% in the UK, rent prices are set to continue to increase next year. The 2023 property market will allow investors to capitalise on this rising rental demand.
The best strategy for an investor to reach their goals in 2023 is to set out specific investment goals and create a roadmap to reach them based on research and trends in the market.
If you would like any assistance in developing your 2023 investment roadmap, click here to book in your free no obligation call with Dan or one of our industry experts at Advantage Investment. Make investing straightforward for you in 2023 and set yourself up for success!