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Are flats a failsafe investment in 2023?

about 1 year ago
Are flats a failsafe investment in 2023?

Buy-to-let continues to be a popular investment vehicle as it’s still a simpler concept to understand when compared to investing in stocks, shares or even crypto currency, for example.

Positivity has been echoed by the results of a new survey among 1,000 UK property investors. Of those questioned by Finbri, 50% said they intended to expand their property portfolios in 2023. And when analysing the responses of more experienced landlords, the company found 67.92% of investors who already owned five or more buy-to-lets wanted to acquire further properties over the next year.

Now the job is to match the intent of ambitious landlords with the best property type for 2023. Here are 5 reasons why a flat maybe a failsafe investment in 2023:-

1. Flats are back in demand

When forecasting the property trends for 2023, Zoopla called time on the demand for rural and coastal properties. Instead, the portal reported that city centre locations and apartments were back on the ‘most wanted’ list. It commented that urban locations offered the jobs and services that movers now crave.

2. Flats are a more affordable entry point for landlords

Perhaps appealing to first-time landlords and cautious property investors, flats can be bought for far less than a house. In fact, Zoopla says that across the UK, houses are currently valued at just over twice the price of flats – the highest price difference witnessed for 20 years. The value of flats is currently attractive, as they fell out of favour during the pandemic when people left urban areas in search of rural space. That said, the value of flats is likely to start rising again as people rediscover the benefits of city living.

3. Flats cost far less to heat and power

There’s no need to reiterate how budgets are being squeezed for almost everyone and the simple truth is smaller properties cost less to keep warm and liveable than larger homes. The difference in price was recently laid bare by Help Me Fix. It found the average annual energy bill for a detached property is £3,300; a semi-detached property £2,650 and a terraced property £2,350. When it comes to a flat, the average annual energy bill is £1,750 – a cost aspect that will remain important to renters during 2023.

4. Prices are set to rebalance in 2023

Depending on what source you read, property prices could fall by 5%, 8%, 10% or 12% over the course of the next 12 months. While there isn’t a crystal ball to predict the exact value drop where you may want to invest, there may be some money saving to be enjoyed by property investors who are in a position to buy soon. Don’t worry if you’re concerned about long-term price appreciation – property prices are widely forecast to recover during 2024 and start rising again in 2025.

5. Borrowing is becoming cheaper

While many people thought 2022’s mini Budget was the sole catalyst for rising mortgage rates, the truth is the era of cheap lending was always coming to an end – it just happened more abruptly. The eye-wincing rates of last autumn have given way to more attractive buy-to-let mortgage deals, with lenders cutting rates for landlords on an almost daily basis. It’s worth speaking to a broker to see how much repayments on a flat purchase would cost now.

If you would like any help formulating a buy-to-let plan for the year ahead, please don’t hesitate to get in touch. We will explain the demand for rental flats in your chosen area, work out any yield based on your finances and start the tenant-find process.

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