As housing market activity picks up its pace moving through the first part of the year, experienced property investors are eyeing up opportunities.
While 2023 was undoubtedly a challenging year for many, leading to some property investors to adopt a “wait and see” approach amid economic uncertainty, multiple factors are already boosting confidence for 2024. Seasoned landlords in particular are viewing the current climate as an opportunity to invest.
It is widely reported that rental demand remains extremely high across the UK – at around a third higher than the five-year average – and property investors working within the buy-to-let space are particularly keen to focus on areas where this appetite from tenants is particularly strong.
And according to the latest research from Paragon Bank, long-term demand for rental property is the reason why 60% of landlords considering expanding their portfolios are keen to do so in the coming year.
The survey polled portfolio landlords specifically, who own four or more properties, to discover their intentions for 2024 and beyond. More than a third (37%) have plans to purchase additional investment properties this year, with 55% releasing equity from other properties to do so, and 58% using existing funds.
Property investors maximising returns
While rental income can make up a significant portion of a typical return on investment for many property investors, with yields being a key consideration – particularly in the current climate – holding onto property portfolios for as long as possible in order to maximise returns remains a popular strategy.
Half of portfolio landlords polled said that their property investments were part of their retirement plan. Compared with other investment options, property can offer a stable outcome for those looking to achieve a pension pot at the end of ownership, as capital appreciation occurs over a number of years.
Just under two thirds (61%) of landlords plan to buy in 2024 with a mortgage, while 39% said they will purchase outright. Cash buyers have been coming to the fore much more in the past couple of years due to higher mortgage rates, and this is more common among property investors than homeowners.
With people generally being more stretched at the moment due to the cost of living crisis and higher mortgage costs, it is not surprising that the poll discovered that profitability was higher on the agenda than ever for property investors.
Yields in particular were a focus for a lot of portfolio landlords, with a fifth (21%) of property investors surveyed saying they would be looking to buyer higher-yielding properties like houses in multiple occupation (HMOs). A further 20% said they would seek to buy a home that could be converted into an HMO.
Richard Rowntree, Managing Director of Mortgages at Paragon Bank, said: “Portfolio landlords are experienced and savvy investors who know how to maximise their returns by targeting properties that offer higher yields. HMOs are one of the most attractive options for portfolio landlords, as they can generate more income per property and reduce the risk of void periods.”
More optimism now
Paragon’s survey found that around a third of portfolio landlords (36%) plan to maintain their portfolios at their current levels, which is a similar level to the number that are looking to increase theirs. The smallest proportion (21%) said they were looking to reduce the size of their portfolios this year.
However, as Rowntree pointed out, the fact that so many property investors are planning to seek new opportunities this year is a sign of growing positivity within the sector.
“Portfolio landlords are optimistic about the future of the buy-to-let market and are looking to take advantage of the opportunities that arise in 2024,” he said.
“One of the ways they can do this is by remortgaging their existing properties, mortgaged or unencumbered, and releasing equity to fund new purchases. This can help them diversify their portfolios, increase their rental income, and secure their long-term financial goals.”
If you’re looking for your next property investment opportunity, contact BuyAssociation today to find out about our current projects in the most profitable locations across the UK.
