Property investors are confident for the year ahead and these are the assets proving most desirable

To invest in anything means you must be fairly optimistic about the investment’s future. At some point, you expect the value of that asset to increase. It could be a few days from now, it may be years. But, you’re confident that with a bit of patience and tenacity, your investment will be successful.

Sadly, optimism and confidence, at least in the press, have been in short supply in recent months. We’ve been bombarded with negative headlines, especially in the property world. It feels like we’re constantly told there’s no hope for house prices, costs, mortgages, commercial properties, buy-to-let yields – and on and on and on.

Still, no matter how much the doomsayers push, investors appear to know that our economic troubles are temporary. Signs of recovery are easy to find when you know where to look. In fact, property investors appear to be increasingly vigilant with these signs, and what they could mean for their portfolios.

At MFS, we wanted to understand how property investors were faring after nearly two years of economic setbacks. As such, in early 2024, we surveyed over 2,000 nationally representative UK adults. Within that sample, we identified property investors, and then asked them about their thoughts and preferences for the year ahead.

Fortunately, confidence among these investors was higher than what many would likely expect. And for many, 2024 is likely to be a year of expansion.

Investors are tuned in to the market

Of the property investors we surveyed, 53% had a confident outlook on their property investments. Interestingly, those in what are believed by many to be the most challenging circumstances are particularly optimistic.

Six in ten property investors aged between 18 and 34 – youngsters believed universally to be skint - are confident in their property investments. This was a higher percentage than seen in any other age group. What’s more, 61% of investors in London, our notoriously expensive capital, were also confident.

Property investors also appear keen to stay on top of their homework these days. Over half (57%) said macroeconomic indicators, such as interest rates and inflation, significantly influence their property investment decisions. More data, less alarmism.

Meanwhile, 51% said they closely monitor trends within the property market to inform their property investment decisions, and 55% place a high importance on forecasts such as house prices and rents when considering changes to their property portfolio.

If these investors stuck to these data points, they were likely very happy to see what’s been trending in the news recently.

Positive economic indicators all round

Better, more hopeful bits of news are emerging. In recent weeks, we’ve seen data from the Bank of England confirm that UK mortgage approvals hit a 17-month high in February.

House prices appear to be stabilising, and inflation is slowing in the UK. It remains to be seen if we’ll hit the 2% target any time soon but, in looking at our economic neighbours, the omens appear good.

Food inflation, for example, has fallen to pre-Ukraine war levels across 38 industrialised countries. Also, Euro zone inflation fell 'unexpectedly' in March, boosting the chances of seeing rate cuts.

Speaking of which, Andrew Bailey has indicated that base rate cuts could be on their way. Much sooner than most likely expected. We may only need to wait for a few more weeks for costs to come down.

Better results are also eking their way out of our most (apparently) troubled sub-sectors. Rents continue to rise, overseas buyers are pouring capital into our buy-to-let market, and it’s still possible for landlords to find 8%+ yields.

The commercial property scene may also be on the verge of a comeback. Big names such as Morgan Stanley, Deloitte, and HMV are all setting a precedent for growth, while Savills expects 2024 to be a turning point for the market.

So, with all this in mind, where are investors looking for opportunity this year?

The most tempting real estate assets

We asked our property investor respondents to select up to three real estate assets that they felt were the most desirable to invest in this year. We were pleasantly surprised to see that buy-to-let assets took the top spot.

This bodes well, considering there’s around 10 new prospective renters for every available property in the UK. And with holiday let owners encouraged to sell up over the coming months due to the Spring Budget, there could be plenty of stock to purchase soon.

Student accommodation is also proving tempting and again, property investors may be able to take advantage of supply and demand imbalances here. In London alone, almost 100,000 more student beds are needed to meet demand, according to Savills. Across the UK, we’re expected to see a shortfall of 620,000 student beds by 2026.

Residential property – not to be let – took our third spot. This market, as obvious as it may be, could dramatically heat up this year. While many pundits and experts believe house prices will drop in 2024, both Savills and the OBR expect prices to rise substantially from 2025 onwards.

Better, more bullish times could be on their way. Where property investors realise this, the specialist lending market will be there – offering tailored, flexible solutions.