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Property investors optimistic about potential rate cuts

Property investors are showing cautious optimism, focusing on the prospect of base rate cuts rather than political changes in the UK or global geopolitical uncertainties, according to a new study.

Rate cuts boosting market optimism
The latest ‘Property Investor Report’ by Handelsbanken, which surveyed UK property investors with an average portfolio of 35 properties, reveals that more than half (52%) are optimistic about the market due to the anticipated base rate cut in August and a possible further cut before the end of the year.

Tenant stress easing
The report also indicates a reduction in tenant stress. Around 53% of respondents reported issues with rental deferrals or contract negotiations, down from 60% in 2023. Additionally, the number of investors experiencing overdue or late payments decreased to 34% this year from 41% last year.

Despite the decrease in tenant stress, void periods have increased, with 60% of the panel reporting more voids, up from 54% the previous year. Handelsbanken attributes this to tenants seeking higher quality and better EPC ratings.

Political and geopolitical impacts
The survey, conducted before the general election, reflects broader market sentiment about potential political changes. A majority (51%) of investors said a change in government would not impact their business plans. Additionally, 40% felt that geopolitical uncertainty made them more positive about the UK property market, while 44% said it had no impact.

Simon Bradley, Chief Credit Officer at Handelsbanken, commented: “There is cautious optimism around the property market and activity amongst existing investors is picking up. It may be that many have decided the economy has potentially reached the top of the interest rate cycle and that the time is right to engage in new deals. We are seeing many of our Handelsbanken property professionals already looking to increase their credit lines in anticipation of potential acquisitions as market rates soften and property values stabilise over the coming months.”

Bradley also noted, “The report shows signs of tentative improvements in the stress factors affecting tenants, which have been driven in recent times by the cost of living and energy crises. However, most respondents appear unaffected by potential political uncertainty and don’t believe that a change in the party in government will lead to significant changes in the market.”

Handelsbanken’s report suggests that property investors are prioritising economic indicators, such as interest rate changes, over political factors, highlighting the importance of financial stability in driving market confidence.