UK Regions leap ahead of London for shrewd property investors

Handelsbanken’s latest ‘Property Investor Report’ shows the East of England as the most attractive region for property investors over the next 12 months.

This region was backed by over a quarter of investors canvassed (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% – level-pegging with the East Midlands.

Support for the South East has also fallen this year, compared to last when it scored 26%.

The study. based on insights from UK property investors with an average of 35 properties each, found that nearly two thirds (62.5%) plan to grow their portfolio in the year ahead. Over a quarter (27.5%) will maintain their portfolio’s current size, and just 8.5% aim to exit the market completely.
 
The research also found that nearly two thirds (62.5%) plan to grow their portfolio in the year ahead. Over a quarter (27.5%) will maintain their portfolio’s current size, and just 8.5% aim to exit the market completely.
 
The majority (70.5%) of those looking to buy more properties want to diversify their portfolios geographically and sectorally.

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 expect to see a large upswing, the highest across the UK.
 
James Sproule, UK Chief Economist at Handelsbanken, says: “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.”
 
The research also revealed that 82% of investors expect demand for commercial property to increase over the next 12 months, marginally ahead of residential property (77%) – possibly driven by consistent numbers of workers returning to offices.

On a sectoral level, the three most in-demand sectors among property investors over the next 12 months are residential flats (63%), commercial offices (62%) – be that for repurposing or to capitalise on top quality assets in prime locations – and residential houses (61.5%).

Support for these sectors has risen dramatically over the last year, with flats up 10% (53%), commercial offices up 4% (58%) and residential housing up 15.5% (46%) compared with 2023.

At the other end of the spectrum, the three lowest scoring sectors this year are commercial retail (50.5%), student housing (49.5%) and residential park homes (32%).