Property investment trends in 2024: Harnessing opportunities and capitalising on change

Investor sentiment towards the UK economy and property investment landscape

First and foremost, MFS’s research shows the majority of people with property investments are optimistic about the year ahead.

Indeed, of the property investors that were surveyed, over half (53%) said they have confidence in the outlook of their investments, while only 14% lack such confidence. The rest were unsure or did not commit strongly either way.

For the most part, this confidence likely stems from the fact that a majority (54%) believe that interest rates will fall this year, while less than half (45%) think that inflation will remain a prominent challenge in 2024.

However, investors did acknowledge that challenges remain. For example, we found that almost six in ten (56%) are worried about the UK entering a recession. Meanwhile, one in two (49%) are concerned that the result of the upcoming general election could have a negative impact on their investments.

In addition to these economic worries, the prospect of further regulation is looming large for property investors. In fact, 56% revealed they were worried about the amount and complexity of regulation, and our study also found that increasing regulation is deterring 54% of investors from investing in more property.

Nevertheless, over a third (38%) of UK property investors believe it will be easier to manage their property investments in 2024 than it was in 2023. One factor that will help is the improving lending landscape.

Since the BoE halted its rate hiking cycle last summer, the lending landscape has stabilised significantly. Some experts are now suggesting that we are witnessing the beginnings of a mortgage price war in the mainstream lending market.

Meanwhile, specialist lenders have already begun reducing rates in 2024. Indeed, at MFS, we recently reduced rates across our residential bridging and buy-to-let (BTL) mortgage product ranges.

What has become clear already in 2024 is that there is a greater willingness to lend as economic conditions improve. Moreover, the very fact that lenders are actively readjusting and adding new options suggests they anticipate increased demand from buyers and investors.

The view of our CEO

“Our research shows that investors are not underestimating the resilience of bricks and mortar. The majority feel that the outlook for the property investment landscape is bright, and recent growth noted across some of the major house price indices should instil further confidence for the months ahead.

“However, investors are not oblivious to the economic and regulatory challenges that continue to test the way people manage their property investment portfolios. Rightly so. Concerns about an impending recession loom large, while escalating regulation – particularly in the BTL sector – is another key concern. In combination, these factors are potentially hindering the growth and attractiveness of investments in the market.

“Our survey shows that investors are understandably navigating an evolving market with both optimism and caution. To help them maintain this balance, lenders and brokers must collaborate to provide access to flexible financial products that can inject a sense of certainty into an uncertain investment landscape. In doing so, they can help their clients achieve their investment goals and ensure that the market continues its recovery.”

– Paresh Raja, CEO, Market Financial Solutions

How are investors making decisions about their portfolios?

A sense of cautious optimism is widespread. But how are investors making decisions about their investments in the current climate?

Unsurprisingly, the majority (57%) of investors said that macroeconomic indicators – such as interest rates and inflation – significantly influence their property investment decisions.

Perhaps as a result, our survey shows that investors are particularly risk-averse in the current market, placing a greater emphasis on carefully tracking broader movements when assessing their investment strategy.

For example, 55% said that over the last two years they have become more diligent in assessing risk, while 51% closely monitor trends within the property market to inform their decisions. In addition, a further 55% place a high importance on forecasts such as house prices and rents when considering changes to their property portfolios.

Despite this, 43% of investors find it challenging to remain up to date on property market news and trends. Thus, the data also reveals that investors are rightly seeking advice from experts in the industry to help them manage their investments.

Almost half (46%) seek analysis or opinion pieces on specialist property websites to help guide their decisions, and over a third (35%) rely on an independent financial advisor, wealth manager or broker for their strategies.

This demonstrates that investors are taking proactive measures to manage their investments and recognise the value of expert insights in navigating an evolving property market.

The view of our CEO

“The chaos of the past two years has left many struggling to keep pace with news and updates, which is hardly a surprising trend to observe in these statistics. However, it’s encouraging that investors have taken a proactive approach to the frantic nature of the property investment landscape by seeking help and guidance.

“If anything, our figures underscore once again the importance of access to educational content and guidance from professionals in the property investment space, as well as expert analysis from the media, and the trade press in particular. More generally, it speaks to how crucial it is that the industry commits to furthering the education and expertise of all the different stakeholders involved in the UK property market.

“This is something we strongly believe in at MFS, which is why we will invest a significant amount of time and resources into producing educational content like blogs, guides, podcasts, and reports that help brokers and borrowers alike make better informed decisions about their deals and investments.”

– Paresh Raja, CEO, Market Financial Solutions

Where do investors think the opportunities lie?

While the property landscape remains complex, finding opportunities that will remain resilient in the months and years ahead is of the utmost importance. As such, for investors looking to take on new properties, it is interesting to see where they perceive the most desirable opportunities lie.

To that end, we asked investors to select from the following list of real estate asset classes up to three assets that they, if any, see as the most desirable to invest in this year. This is what we found out:

The view of our CEO

“Clearly, despite the perennial doomsday predictions about the ‘death of buy-to-let’, our research shows that investors continue to see BTL assets as resilient and desirable investments.

“However, as with any emerging opportunities, the devil is in the detail. Factors like location, yields and predicted growth are all vitally important. Fortunately for investors, the window of opportunity created by the prospect of rate cuts on Threadneedle Street this year means that plenty of potential investments are emerging.

“For landlords looking to secure a BTL property investment, pinpointing the areas that are going to enjoy similar growth in the years ahead will be best placed to benefit from a recovering property market.

“Looking ahead, the Royal Institution of Chartered Surveyors (RICS) anticipates a 5% growth in average rents per annum across the UK over the next five years. That said, certain market segments are expected to outperform the overall market. Prime outer London, for example, is projected to experience an 8% price increase in 2024, outstripping the national average.

“For these types of property investments, location is likely the most important factor to consider. Those interested in student accommodation, for example, will want to focus on the popular university cities that are likely to provide the best returns and demand.

“Liverpool, for example, is one of the best student cities in the UK, which enjoys an average yield of 7.92% for its student rentals. For comparison, the rest of the country generates an average of 4.5% to 6.5%. Leeds, Newcastle and Manchester are other prominent cities with large student populations.

“For any investors looking to capitalise on these opportunities in the months and years ahead, I strongly encourage you to reach out to us at MFS. Economic challenges remain, so the flexibility, speed, and overall service that we can provide is likely to be of significant value while the market recovers.”

– Paresh Raja, CEO, Market Financial Solutions