The investment world has become a slightly confusing place to navigate in 2023.
Whether it’s the stock market, or REITs, each year seemingly brings a new set of complications.
The residential property investment sector is no different.
With constant advancements, new regulations, and shifting property taxes, it can be difficult to keep up with it all.
However, as a real estate investor, it’s important that you at least try to keep up with the pace. Most importantly, if you want the best rental income, it’s vital that you understand and learn how to identify emerging real estate markets.
There are multiple indicators that show when an area might become a lucrative investment opportunity. Whilst some cities will always reliably maintain their strong status, the best investors will learn how to spot the places that most would miss.
Here are some of the most important details to look out for investing in property as a beginner, as well as an overview of where the market is heading for the rest of 2023 and beyond.
Rising Rental Figures
Staying up to date with the latest rental yields is the best way to gauge the performance of an area and assess whether it has the potential to become a flourishing sector within the wider rental market.
Spend some time investigating the amount of time a property stays on the market. The amount of time it takes for the average property to sell in an area can be a good indicator of an upcoming market boom and a good investment overall.
According to a recent study by Zoopla, those with the fastest rising rental yields were big cities like London, Manchester, and Edinburgh.
Of course, securing a property in an area like London might be difficult to obtain – owing to skyrocketing property prices (in some areas as high as £1,776,950, alongside the rental figures.
Investing in property in cities like Manchester, however, may offer solid capital appreciation alongside a lower entry point, especially if you’re looking for a long-term investment.
According to the latest projections from Savills, the North West is expected to see house price growth of around 11.7% in the next five years to 2027.
This is the highest amount of capital growth predicted and makes the region one of the best areas to look out for in the coming years.
Population Rate/Growth
Population rates are another key indicator of a growing market.
Most experts will agree that areas with a growing number of young professionals and young families are the best ones to look out for.
Target markets like these are typically the most likely to be actively searching for somewhere to rent instead of outright buying a property for themselves.
Something which, as an investor, is exactly the kind of thing you should be looking for.
Urban Regeneration
According to RWinvest, a good way to determine impending population and property value growth is to keep an eye on the amount of ongoing regeneration within a city.
This might be a refurbishment of an older historic building or a government-funded scheme to inject money into underdeveloped areas or amenities.
Things like this will undoubtedly drive-up interest from not only prospective investors but also an emerging wave of tenants seeking a desirable place to live.
Cities like Liverpool have seen massive waves of regeneration over the last few years, which has no doubt assisted in cementing the city as one of the best places to live and work.
The Latest Market Developments
Changes in taxes, property laws, and property prices can greatly impact the state of an investment market.
At a local level, you can attend local council meetings to learn about upcoming votes and potential new legislations (for example, the 90-Day property rule currently only seen in London) that could impact an investment.
What Should Investors Expect in 2023?
Sustainability
The residential real estate sector and landlords in 2023 have been given a huge incentive to make their property portfolio as eco-efficient as possible.
In 2020, the government began discussing proposals that would see all UK rental properties requiring an EPC rating of C or above in order to be legally rented to tenants.
This would be a significant increase from the current requirement of E or above.
If these new legislations are enacted, they could go into effect as soon as 2025 for new-build properties and 2028 for existing ones.
This would require all properties – regardless of whether they’re new-builds or not – to meet higher energy efficiency standards to be legally rented out.
Therefore, landlords that currently own properties with sub-standard EPC ratings could be forced to pay substantial fees in order to ensure that everything is up to scratch.
Neglecting these duties could see significant fines of up to £30,000.
This narrow timeline underscores the urgency of reducing the country’s overall carbon emissions and stresses how seriously the government is taking the climate issue.
The main takeaway, though, is that landlords should take immediate action to avoid incurring hefty costs in the future.
Many experts predict a shift in focus from investors towards new-build or off-plan properties.
The impending implementation of these guidelines has spurred many property developers into heavily incorporating energy-saving technologies into their designs.
These include:
● Solar Panels: Typically seen as coming with a hefty purchase price, the installation of solar panels actually offers many long-term benefits – particularly during times of rising energy and living costs. Those that can successfully and effectively harness solar energy can see their properties become much more energy-efficient in the long run. As solar power can be stored, it can add even more value to a property, especially in the event of unforeseen circumstances (such as an area-wide grid failure).
● Eco-Friendly Insulation: Eco-friendly installation can significantly reduce energy bills for tenants and landlords alike. Things like proper floor and wall insulation can prevent heat loss, and additionally, eco-friendly insulation further reduces a property’s carbon footprint.
● Smart Meters: Smart meters can play a massive part in effectively managing and monitoring energy usage. These can allow for smaller and more frequent payments that are often more financially manageable for tenants (and landlords) than the traditional method of dealing with monthly energy bills.
Changing Needs of Tenants
Most workers are still not back in the office nearly as often as they were before the pandemic.
In fact, multiple sources cite that less than half of workers in the UK actually go into an office on a given day.
In fact, according to the Guardian, more than a third of workers said they would quit if told to return to the office full-time.
It’s clear that remote work is here to stay – in some form or another.
To that end, there have also been massive changes towards what renters expect from their properties in 2023. We would also like to remind our readers to consider using Ecologi so that you can do your bit for the environment in 2023.
A 2022 study by FJP Investment found that around 23% of people said that an increase in homeworking had made them reconsider what they wanted from their property – with 44% of younger professionals agreeing.
Rental properties that incorporate both outdoor space and remote working facilities are becoming a priority for those seeking new places to live.
Many property companies are suggesting that proactive homeowners, then, should consider focussing their direction on properties to get the most out of their investment.
With a significant amount of political and economic uncertainty, one of the only things that remain clear is that the experiences of the pandemic and remote working have undoubtedly changed the way people approach their lifestyles.
With many workers still preferring to remain out of the office, the properties that adapt alongside them should be the ones to keep an eye out for.
Hotels/Serviced Accommodation
In the wake of one of the worst industrial crises in history, the UK hotel sector saw an impressive rebound in 2022. In 2023, hotel demand is expected to remain resilient, with it projected to see the first full Covid-free year since before the pandemic. However, as a result of the cost of living and predicted economic instability, the business travel market is expected to take a hit.
According to CBRE, though, demand for small corporate MICE (Meetings, Incentives, Conferences and Exhibitions) business appears to be on the rise.
Another market expected to see some interest in 2023 is serviced accommodation.
These are fully furnished properties that are rented out to tenants for short-term stays, offering all the usual services you would expect from a hotel, including housekeeping, Wi-Fi, laundry, and concierge services, and, depending on the landlord and the property itself, these services can be tailored to create a bespoke experience like that of high-quality hotels.
This unique combination of hotel services and the privacy of an apartment appeal particularly to those seeking shorter stays, so it’s no surprise that this type of investment property is gaining significant traction with both investors and tenants.
Typically marketed through sites like Airbnb, the market experienced tremendous growth in recent years and has led to the conversion of many buy-to-let properties, such as Houses in Multiple Occupations (HMOs), into serviced apartments. Serviced accommodation can come in various forms, including apartments, houses, cottages, caravans, and even houseboats.
As the popularity of this property type and short-term letting continues to soar, property investors are considering its pros and cons to determine its suitability as an investment strategy.
The main reasons behind the huge influx in popularity of serviced accommodation are:
● Better value for money: With serviced apartments, guests can enjoy more room for similar prices to hotels, with some even offering lower rates.
● Extra privacy: The privacy of a serviced apartment appeals to those who prefer a more secluded and personalised experience.
● Proximity to city centres: Serviced apartments are often located near city centres, providing easy access to amenities and transportation. Many also offer parking facilities.
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Given these advantages, serviced apartments have become an increasingly lucrative investment strategy to cater to the growing demand for short-term accommodations.
Becoming a Proactive Investor
By exercising due diligence and being aware of indicators like these, forward-thinking investors will be able to identify the most profitable and worthwhile UK property investment opportunities, as well as avoid investing in areas that are either stagnant or facing significant decline. For those seeking to secure passive income and the best return on investment, keeping up-to-date with the latest trends and market statistics will help a great deal.
