Landlords target student housing

Student housing is seen as the most appealing property investment in the next 12 months, according to a report from the mortgage lender Together entitled ‘Opportunities and Outlook; the future of commercial property’.

Almost a quarter (23%) of landlords reckon student housing offers the most appealing property investment in the next 12 months, followed by housing developments (21%) and luxury residential properties at 19%.

Chris Baguley, group channel development director at Together, said: “As we look at the UK commercial property landscape, the scope and diversity of the opportunities is impressive.

“Whether its student housing, housing/residential development or repurposing retail and other larger sites, the next few years are going to provide significant growth for the UK commercial property market.

“The optimism of the sector, combined with the economic recovery, mean those investors that are well poised with the right finance support will ultimately be in the best position to capitalise on these opportunities.”

Commercial lending is expected to swell from £90bn in 2023 to £118bn in 2028.

While the turbulence evident across interest rates throughout 2023 has eased, debt and the cost of borrowing continues to be at peak levels – with a third of property developers, landlords and investors citing inflation (30%) and high interest/mortgage rates (27%) as the biggest challenge to plans this year.

However, there are clear signs the commercial property market is adjusting to this high interest rate environment. A major part of this adjustment is via the bullish appetite of commercial developers, investors, and landlords either exiting or diversifying portfolios to mitigate falling yields and revenues.

Rob Thomas, economist and principal researcher at the Intermediary Mortgage Lenders Association (IMLA), said: “In the short term, while inflation is coming back under control, the higher interest rate environment will take some adjustment for commercial property businesses, landlords and developers– including de-risking portfolios and diversifying into new growth sectors.

“However, for those looking for growth in the medium to longer term there are opportunities across the sector this year onwards.

“And the insight on the ground is that the sector is in rude health. The research we’ve undertaken shows that, while some property professionals are scaling back or exiting the market, the majority are committed to developing their portfolios and many are even taking advantage of the temporary reduction in property prices to expand. When looked at in the round, the scale of the opportunity is significant.

“To put it in perspective, total secured commercial lending is predicted to rise by 32% from an estimated £90bn in 2023 to £118bn in 2028.”