Investors showing cautious optimism

Adapting to market shifts is critical for the success of property investors. According to a recent report, many are showing cautious optimism while adjusting their portfolios and finances to navigate potential challenges in the sector[1]. In response to recent increases in mortgage interest rates, 91% of property investors are focusing on debt reduction.

This strategy can offset some of the costs associated with higher borrowing expenses. With property prices no longer rising as they did post-COVID, many investors are shifting their focus to monthly rental yields. Lowering mortgage expenses can positively impact their overall income.

INCREASING PORTFOLIO SIZES THIS YEAR

The survey, which included responses from 200 professional landlords across different sectors in the UK, indicated that 59% plan to increase their portfolio size this year, highlighting continued interest in UK property. Around 27% intended to maintain their current portfolio size, while 9% planned to sell all their assets. A small percentage (5%) aimed to reduce their portfolio size.

Regarding residential property demand, 40% of investors expected significant growth over the next year, while half predicted a slight increase. This expectation could be due to the ongoing supply shortage leading to high competition in the market.

FUTURE-PROOFING PORTFOLIOS

Property investors are also considering futureproofing their portfolios in light of government proposals for net-zero carbon emissions. Despite the challenges, many are preparing for the legal obligation to offer private rented sector housing with a C-rated energy performance certificate (EPC).

However, awareness still needs to improve, with only 52% of respondents familiar with the government plans. Yet, many investors intend to invest heavily to ensure their portfolios meet required energy efficiency ratings. Over half (55%) plan to spend £100,000 or more on upgrades or energy-efficient investments in the coming year.

GOVERNMENT’S GREEN TARGETS

Most surveyed investors (92%) believe their property portfolio value will increase by at least 5% over the next 12 months, which could help offset the costs of meeting the government’s green targets. Many experts are forecasting that with the rise in interest rates, it’s hard to foresee residential prices stabilising soon. However, the peak of interest rates projected in August could pave the way for price recovery by autumn and early 2024.

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