London loses top spot for property investors looking for new opportunities

Investors in the residential and commercial property markets are looking beyond traditional hotspots to grow their portfolios ahead of possible interest rate cuts.

Handelsbanken’s latest ‘Property Investor Report’, based on exclusive insights from UK property investors with an average of 35 properties each, found that the East of England was cited as the most attractive region for property investors over the next 12 months (26.5%), closely followed by North East & Cumbria (24.5%), North West (22%) and South East (21.5%), with respondents appearing to focus on areas with higher yield characteristics, rather than those with historically strong demand. 

Last year, London was the most popular investment hotspot, while this year, it has dropped to fifth position with 21% – on level-pegging with the East Midlands. Support for the South East has also fallen this year, compared to last when it scored 26%.

Handelsbanken’s latest ‘Property Investor Report’, based on exclusive insights from UK property investors with an average of 35 properties each, found that nearly two thirds (62.5%) plan to grow their portfolio in the year ahead. Over a quarter (27.5%) will maintain their portfolio’s current size, and just 8.5% aim to exit the market completely. 

Market outlook

The research also found that nearly two thirds (62.5%) plan to grow their portfolio in the year ahead. Over a quarter (27.5%) will maintain their portfolio’s current size, and just 8.5% aim to exit the market completely. 

The majority (70.5%) of those looking to buy more properties want to diversify their portfolios geographically and sectorally, with, as previously mentioned, the East of England leapfrogging London to become the most attractive region, and residential flats seen as the most attractive property type by investors.

Valuations expected to climb

An overwhelming majority of respondents (81%) expect the value of their portfolio to increase over the next 12 months, with nearly a third (31%) believing it will grow by more than 20%, and nearly 50% expecting a slight uptick of around 5%. Optimism was highest in Wales, with 59% of respondents expect to see a large upswing, the highest across the UK.

James Sproule, UK Chief Economist, at Handelsbanken said: “While headlines over the coming months are likely to be dominated by the general election, interest rate cuts and the ongoing cost of living crisis, these factors don’t seem to be jeopardising investors’ upbeat mindset.”

“The adjustments to capital valuations, often masked by inflation, as well as increases to rents, have resulted in property once again delivering a premium over gilt yields –  and opened up the potential for attractive opportunities as the economic recovery progresses.”

Demand for residential flats climbs 10% to claim top spot

The research also revealed that 82% of investors expect demand for commercial property to increase over the next 12 months, marginally ahead of residential property (77%) – possibly driven by consistent numbers of workers returning to offices. 

On a sectoral level, the three most in-demand sectors among property investors over the next 12 months are residential flats (63%), commercial offices (62%) – be that for repurposing or to capitalise on top quality assets in prime locations – and residential houses (61.5%). Support for these sectors has risen dramatically over the last year, with flats up 10% (53%), commercial offices up 4% (58%) and residential housing up 15.5% (46%) compared with 2023.

At the other end of the spectrum, the three lowest scoring sectors this year are commercial retail (50.5%), student housing (49.5%) and residential park homes (32%).

Andy McCabe, District Head, East of England said: “Our latest report highlights the true breadth and depth of investor appetite across the UK's varied regions and property sectors. 

“As well as other advantages and opportunities, parts of the East of England region are particularly attractive from a yield perspective, all of which is helping this part of the country to have one of the fastest growing populations and economies in the UK.

“At Handelsbanken, our nationwide branch teams have an in-depth understanding of their respective markets, enabling them to offer valuable insights into local dynamics, emerging trends, and potential opportunities. We take pride in being a trusted partner, leveraging our on-the-ground presence to deliver personalised advice that aligns with our customers’ unique goals." 

Read the 2024 Handelsbanken Property Investor Report via the link below You can also view previous reports on this page.

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Notes to Editors

• *Handelsbanken commissioned research in March 2024 through independent research company Pure Profile among a panel of 200 property investors across the UK. They included 17 respondents in Wales, the East Midlands, East of England, London, North East & Cumbria, North West, Scotland, South East and the South West. There were 16 respondents from Northern Ireland, Yorkshire & The Humber and 15 from the West Midlands. The sample was broken down with 35 owning outright or with a mortgage between five and 15 properties; 35 owning outright or with a mortgage between 15 and 25; 35 owning outright or with a mortgage between 25 and 50; and 95 owning outright or with a mortgage more than 50 properties. Around 28.5% classified their business as real estate investment, while 33.5% classified their business as property management, and 38% classified their business as landlords (residential or commercial). More than half (51.5%) of the total sample owned student lettings or HMOs as part of their portfolio, while 50% owned non-student lettings or HMOs; 26% owned static park homes; 58.5% owned offices; 51.5% owned retail properties; 45% owned industrial properties; 12% owned leisure properties and 8.5% owned healthcare properties including holiday parks and hospitality. The average portfolio comprised 35 properties, with the mean individual property value across all portfolios standing at £263,900. 

Information on Handelsbanken plc

Handelsbanken is the trading name of Handelsbanken plc, which is incorporated in England and Wales with company number 11305395. Registered office: 3 Thomas More Square, London, E1W 1WY, UK. Handelsbanken plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 806852.

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Handelsbanken was established in Stockholm in 1871 and in Sweden, it is one of the country’s leading banks with a nationwide branch network. The Bank’s home markets are Sweden, Norway, the Netherlands, and the UK. It also has operations in Luxembourg and the USA.

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