Landlords eye expansion in 2024 following volatile 2023

Despite a highly challenging 12 months for both landlords and developers, optimism remains relatively high and opportunities continue to be found, according to newly released research.

Related topics:  Landlords,  Property,  portfolio
Property | Reporter
17th January 2024
To Let 855
"The winners of 2024 and beyond will be those who are able to seek out new opportunities, spot where best to create value and use the right financing to capitalise on emerging growth sectors"
- Chris Baguley - Together

A new nationwide report from mortgage lender Together has found that 34% of Buy-to-Let landlords are gearing up for further expansion in the next 12 months, shrugging off tough market cautiousness.

Indeed, while 10% of all respondents admitted their reservations about their business outlook ahead of 2024, 68% feel optimistic, with a quarter planning to refinance their properties to support business objectives over the next year.

The findings come ahead of the launch of Together’s report, Opportunities and Outlook; the future of Commercial Property, featuring an outlook on the commercial sector for the next three to five years, written by economist Rob Thomas.

The study indicates that while 44% of respondents are de-risking and shrinking portfolios or exiting the market altogether (14%), the vast majority are committed to increasing their portfolios now that Q4 2023 saw inflation finally return to below 5%.

58% of all respondents would recommend others invest in the UK commercial property market now despite the events of the last year. This comes as 42% of have seen an increase in revenue in the last 12 months.

While 16% of commercial landlords are exiting altogether, doors are being opened for a new generation of professional landlords and developers to step in. Regionally, those surveyed in London, the West Midlands and the Northwest of England will be buying more properties over the next year. And not all are entering the commercial market via traditional routes, 10% of all respondents admitted they were influenced by social media and property influencers seen online.

The opportunity for specialist lenders and policy support needed

There is an undeniable opportunity for landlords, investors and developers to take advantage of specialist finance. The sector provides invaluable finance in times of austerity when many mainstream lenders’ appetite to financially support projects tends to wane.

The demand is bourne out in Together’s study, with 42% of all respondents saying they would prioritise using a specialist lender rather than mainstream in the next 12 months, should they require additional financing for commercial property cases.

The top three reasons for this are; that specialist lenders are prepared to take greater risk, grant larger loans, and support entrepreneurial plans (39%), they are the fastest (29%) and they provide the best level of service (also 29%).

However, Government support is a crucial part of the puzzle to address the current lack of stock, allowing developers and investors to realise their expansion plans from next year onwards.

The Treasury’s pledge to remove the red tape surrounding planning applications is vital to improve time delays. Still, there are other factors inhibiting growth, including labour shortages in the construction industry.

Ahead of a new political year, Together’s research found that 20% of UK property professionals are keen for the Government to address the major skills shortage within the building trade as a priority, with 18% wanting a review of rising costs for materials and labour.

Chris Baguley, Group Channel Development Director at Together, commented: “The short, sharp shock in interest rates since the Covid years triggered some cautiousness in the commercial market while investors were trying to predict where the peak would be. With rates settling, while there is still an overall flattening; activity is returning as the sector reacclimatises to the new environment.

"At Together, we are still funding more than a thousand completions a month, highlighting the underlying appetite in the market. What continues to be apparent is the clear optimism and enduring health of the commercial sector.

"The winners of 2024 and beyond will be those who can seek out new opportunities, spot where best to create value and use the right financing to capitalise on emerging growth sectors.”

Rob Thomas, Economist and Principal Researcher at the Intermediary Mortgage Lenders Association adds: “The improving outlook we can see in our macroeconomic forecast, coupled with supportive structural factors such as rising population and constrained supply due mainly to planning constraints, allows for a recovery in property prices and markets from 2025, picking up momentum from 2026 onwards.

"This in turn supports a recovery in lending to these markets despite what has been a tougher financial environment.”

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