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London cedes prime position in UK property investment

Recent shifts in the property investment landscape have seen London lose its long-held status as the go-to region for investors in the residential and commercial markets, according to Handelsbanken’s latest ‘Property Investor Report’.

Shifting Investment Preferences
The report, which gathers insights from UK property investors who, on average, manage 35 properties, highlights a strategic pivot towards regions offering higher yields rather than those with traditionally high demand. This year, the East of England emerged as the top region, attracting 26.5% of investors, followed closely by North East & Cumbria (24.5%), and North West (22%). London has notably dropped to fifth place, tying with the East Midlands at 21%, a significant decline from last year’s top spot.

Market Expansion and Optimism
Despite potential economic uncertainties such as interest rate fluctuations and the ongoing cost of living crisis, a substantial majority of investors (62.5%) plan to expand their portfolios over the next 12 months. This optimism is reflected in the robust confidence levels about property valuations, with 81% of respondents expecting an increase in their portfolio’s value. James Sproule, UK Chief Economist at Handelsbanken, remarked on the resilience of the property market, noting, “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.”

Diverse Demand Across Sectors
Investors are increasingly interested in diversifying their holdings both geographically and sectorally. Residential flats have become particularly attractive, seen by 63% of investors as the top property type, marking a significant 10% increase in interest from the previous year. Commercial offices and residential houses also saw increased demand, suggesting a balanced interest across various property sectors. Andy McCabe, District Head for Handelsbanken in the East of England, highlighted the region’s growing appeal: “Our latest report highlights the true breadth and depth of investor appetite across the UK’s varied regions and property sectors… 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.”

As the UK property market continues to evolve, investors are increasingly looking for high-yield opportunities beyond traditional hotspots, signaling a potential reshaping of investment strategies in the coming years.