With confidence and demand in the commercial property space gaining momentum, SME landlords have indicated that they are planning to expand their portfolios in the year ahead.
Research from Handelsbanken found that 49% of professional landlords – those owning at least four properties – intend to buy more, of which 8% plan to invest in improving the quality of their portfolio, underlining their enduring confidence in bricks and mortar as a long-term investment.
Just 7% of landlords expect to sell some or all of their portfolios, and 35% are committed to retaining their current properties for the next 12 months.
The first Handelsbanken SME Landlord Survey found that 86% of landlords expect a rise in demand for residential property, with 63% confident that commercial property demand will also increase in the next 12 months.
Landlords’ optimism is not being driven by expectations of substantial increases in yields – Handelsbanken’s research shows average yields are only expected to rise by 0.44% over the period, although 89% of landlords questioned do expect an increase.
Instead, their plans to buy more properties are motivated by a desire to diversify their assets across different sectors and regions.
73% said their plans to buy are focused on expanding into different parts of the property market – the most attractive are houses (66%), followed by flats (38%), houses of multiple occupation (34%) and commercial retail (32%).
Among landlords expanding their portfolios to different parts of the UK, London is seen as the most attractive region (selected by 53%), followed by the East of England (chosen by 40%) and the East Midlands (22%).
51% of landlords on the acquisition trail said their reason for buying was simply feeling bullish about the market.
James Sproule, UK Chief Economist, at Handelsbanken, said: “Recent house price growth shows how property has shown its resilience against economic doom and gloom and the cost-of-living squeeze.
“Landlords are anticipating that a shortage of rental properties will help keep prices buoyant, particularly as working patterns continue to adjust to the post-pandemic world and people seek to move back to big cities, particularly in popular areas such as London, which is also seen to be better placed to ride out the next series of economic challenges and opportunities.
“Landlords went through a tough period following the COVID-19 pandemic, with residential property transactions falling by more than half and business investment contracting. But the sector has survived and is now looking forward.
“The 2022-23 financial year is forecast to see a further softening in residential property transactions as vendors wait for the right buyer rather than accept any perception of loss in value.”
