Following three years of seismic shifts in the property sector, the UK is moving towards a ‘new normal’ – with the 2022 mini-budget and the rising cost of borrowing having an impact on how investments will look in 2023 and beyond. 

From a renewed interest in urban property to the continued focus on eco builds, Hodge’s commercial investment expert Gareth Davies gives his insight into the trends and changes investors should be aware of this year:

BTL portfolio investment will peak in affordable urban areas

“The unprecedented demand for rural property seen in 2021 and 2022 has waned, with affordable urban areas now peaking investors’ interest. In particular, areas with a strong local employment base and good transport links represent an opportunity for investors as these features – together with affordability – appeal greatly to buyers against the current back-drop of economic uncertainty and high cost-of-living.”

Greater energy efficiency will be more of a necessity

“The new incoming laws for landlords around energy efficiency in commercial properties will no doubt accelerate the need for improved energy efficiency. Putting aside the importance of meeting these legal requirements, hitting higher energy efficiency standards is also a selling point, due to the cost-saving benefits good insulation, glazing and renewable energy can tran

Rising interest rates and inflation will affect residential investment

“The era of low-cost mortgages has gone, at least for now, and the challenge for some investors is that as their two, three and five-year fixed rates begin to expire, the cost of refinance is now significantly different. 

“The current landscape also means a change in borrower trends, as variable rates and shorter tenors become more attractive, alongside bridging finance – which for some represents a smaller risk than committing to long-term fixed rates while these are still high.”

To learn more about what 2023 has in store for commercial investment, click here.

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