It’s fair to say that 2023 has been an eventful year for the UK’s buy-to-let landlords. Following the chaos unleashed by Liz Truss’s now infamous mini budget just over a year ago, mortgage markets have settled somewhat in recent months and prices have held up better than expected, according to a report from Savills. However, inflation remains stubbornly higher than the long-term average at 4.6%, which is continuing to drive up interest rates and therefore mortgage costs for the buy-to-let market. As such, this has undoubtedly been a challenging period for landlords, some of whom have gone so far as to sell up amid diminishing returns.
Brighter days ahead?
Despite the adversity that landlords have experienced this year, some are forecasting that 2024 will deliver greater returns to them. For example, Zoopla data suggests that rents will grow by 9% next year, amid heightened demand from renters unable to buy due to inaccessible mortgage rates. As such, this might give pause for thought to any landlords looking to sell up, with those who hold out a little longer likely to benefit from strong yields as the market gathers pace in the coming months.
However, other industry commentators believe that the year ahead will continue to be difficult for landlords, there is no clear consensus on what 2024 will bring, and this is understandably creating uncertainty among investors. As such, many are exploring alternative forms of investment, such as property bonds, which are increasingly being seen as the ‘new normal’ due to the instability of the buy-to-let market.
The growth of BTR and office-to-residential conversions
Given the hardships many buy-to-left landlords are currently facing, we expect to see far more discovering the benefits of property bonds this year. In turn, this will help the build-to-rent [BTR] market to grow considerably. While BTR units have become increasingly common across the UK in recent years, 2024 is set to be the year that this segment of the property market truly takes off. With green initiatives continuing to ramp up as calls for more environmentally friendly housing grow among tenants, BTR is set to play a pivotal role in securing the UK’s sustainable future.
On the subject of sustainability, another area of alternative investment likely to attract plenty of attention next year is the office-to-residential conversion market. With working from home having been normalised by the pandemic, and more than half of businesses planning to downsize their premises – according to the Institute of Chartered Accountants – vacancies on the office property market are on the rise. This presents a unique opportunity to address the nation’s housing shortage by converting disused office spaces for residential use. As such, investing in office conversions isn’t merely a sound investment, but a socially responsible one that represents a net positive for the economy, investors, and tenants alike.
Get in touch
Clearly, 2024 looks set to be a very exciting year for the UK’s property market, throwing off the doom and gloom that 2023 has brought for investors. With so many opportunities out there, however, we appreciate that understanding which investments are right for you and your needs can be challenging. At HJ Collection, we have been working with in the property industry for years, gaining invaluable expertise, experience, and contacts in the process. This puts us in the perfect position to maximise the full potential of the property market, while ensuring that our clients receive the very best possible investment advice.
If you would like to discuss investment options with our team, please get in touch.