0:03 AM, 13th June 2023, About 9 months ago
In the face of economic uncertainty, large portfolio professional landlords are focusing on reducing debt and optimising their portfolios, one study reveals.
The research from Handelsbanken shows that investors who own a portfolio with an average of 29 properties worth around £14 million, are keenly aware of the risks and obstacles in the current market.
A staggering 91% of respondents said they are planning to decrease the debt on their portfolios as interest rates rise, concentrating on achieving the best yields and risk/return profiles.
The Handelsbanken Professional Landlords Survey also reveals that 66% of professional landlords who are selling assets have a pessimistic outlook on the market.
And 24% admit they cannot afford to update their portfolios to meet the proposed Energy Performance Certificate rules in England and Wales.
Handelsbanken’s UK chief economist, James Sproule, said: “In contrast to owner-occupiers, professional landlords will often have a more detached and less emotional view of property values and are more likely to act in a way that recognises market realities.
“That’s why we are seeing landlords sensibly paying down debt, while others are increasingly alert to opportunities in sectors such as offices.”
He added: “More broadly, with interest rates still rising, it is difficult to see residential prices stabilising in the short term.
“At least with inflation remaining well above its target level nominal prices will not reflect the real full impact of price declines.
“Looking forward, the peak of interest rates, likely to be in August, will set the scene of a price recovery in the autumn and early 2024.”
Despite market volatility, many investors say there will be opportunities to buy properties at lower prices, aiming for long-term value creation and re-purposing assets.
These landlords also want to capitalise on shifts in work patterns back towards increased office usage.
This sentiment is supported by 58% of survey participants indicating plans to expand their exposure to commercial offices, and just over half expressing interest in increasing their retail property investments.
These findings highlight, Handelsbanken says, the continued confidence in UK property as a viable asset class.
This research arrives during a period of heightened focus on the property sector, with both residential and commercial markets seeing prices being it.
Also, the data highlights that rising interest rates and housing supply shortages are ‘posing significant’ challenges for investors.
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