What’s in store for the property market in 2024?
If you're a seasoned property investor, you're in for an exciting ride next year! Despite the rumblings of uncertainty in the property market, in 2024 landlords are taking the bull by the horns and charging ahead.
By Emma Cox, Managing Director of Real Estate
In our ever-evolving world of property investing, knowledge is power, and we have gathered a unique glimpse into the future of this industry. These valuable insights have been gleaned through a survey of seasoned professional property investors. It provides a window into the strategies, concerns, and aspirations of those at the forefront of the property market in 2024.
As we step into the new year, let’s look at the trends, opportunities, and challenges that will shape the landscape for property investing in the coming year[1].
Bullish landlords forge ahead
In a climate of property market unpredictability, an astonishing 79% of landlords have expanded their property portfolios in the last six months. What's driving this wave of confidence? Well, it's a mixture of seizing good deals (32%), having capital ready to invest (32%), and a desire to diversify (28%). Many landlords are reshaping their portfolios by selling properties to acquire more lucrative assets elsewhere. Approximately 21% of them are freeing up capital to invest in better properties.
But this growth isn't stopping anytime soon. A quarter (25%) of landlords have their sights set on adding another property to their portfolio in 2024. A daring 20% are considering multiple investments.
When diversifying, landlords are exploring different locations (38%), types of residential properties (35%), student housing (25%), commercial property (22%), and retirement housing (20%).
They're drawn to diversification for a myriad of reasons, such as achieving better yields (32%), increased tenant demand (31%), and prioritising energy-efficient buildings (28%).
EPC regulation ready
Before it was announced the Government was scrapping the new regulations, landlords had stepped up to the plate regarding Energy Performance Certificate (EPC) changes. A third of them have properties with ratings of A-C and over half of landlords have plans to enhance their properties[2] ratings before the (now defunct) 2025 deadline. Only 17% feel unprepared. A substantial 44% of landlords with over 21 properties already have A-C properties in their portfolio.
The investment into EPC improvements is significant, with nearly half (46%) of landlords spending between £500 to £20,000. The mean average spent by landlords is an impressive £25,148, rising to £37,164 for those in London. The East Midlands lags behind with an average spend of £16,942.
While London landlords lead the way with the highest proportion of A-C properties (36%), the Northwest trails at 20%. Nevertheless, a whopping 59% of Northwest landlords have plans in place to make improvements, surpassing the national average.
However, concerns linger over potential delays and increased labour costs. A substantial 22% of landlords are worried about the level of guidance provided.
The commercial frontier beckons
For those looking to diversify even further, the commercial property market is a tempting frontier. An impressive 19% of residential landlords are considering branching into the commercial realm. Moreover, 35% of residential landlords who already own commercial assets plan to invest even more.
Why this commercial interest in the property market? Diversification (37%) tops the list, followed by the increased demand for commercial property (36%) and a desire to support local businesses (29%). In addition, 24% of landlords believe there's a lack of quality commercial property for small businesses.
When it comes to commercial property types, office space leads the charge at 36%, followed by small retail spaces (33%), large retail spaces (30%), and industrial or manufacturing spaces (28%).
Top investment picks
What property types are investors favouring in 2024? In the property investing market, flats in cities are the cream of the crop, with 28% of landlords considering them the best investment of the last year and projecting continued success. Semi-detached properties in cities (21%), student accommodation (18%), and detached properties in cities (17%) have also performed admirably.
Looking ahead, student accommodation is expected to be the next star performer, as predicted by 20% of landlords. Interestingly, HMOs (House in Multiple Occupation) are piquing the interest of landlords with bigger portfolios. Rising rents and first-time buyers grappling with affordability challenges could boost demand for this property type.
Surging tenant demand
Landlords are riding a wave of tenant demand, with an average 33% increase in enquiries over the past year. A staggering 72% of landlords have witnessed a surge in demand, with 31% experiencing significant growth and 41% reporting a slight uptick.
This robust demand in the property market has injected optimism into the landlord community, with 70% feeling hopeful about the year ahead. Notably, 24% are very optimistic, and 46% are quite optimistic. However, challenges loom on the horizon, including rising rates (33%), energy prices (34%), and inflation (32%).
As we march into 2024, property investors have much to look forward to. With bullish landlords, a diversification trend, and surging tenant demand, it's shaping up to be a year of exciting opportunities in the world of property investing.
Stay tuned for what is looking like a promising year in the industry!
[1] The research was conducted by Censuswide in August 2023, surveying 1,012 UK landlords aged 18 and over
[2] https://www.shawbrook.co.uk/media/5064/shawbrook-epc-2-report.pdf