Second home British property buyers focus on energy efficiency and lettings potential

Created: 31 Jan 2023

Ongoing UK inflation, and corresponding energy bill increases, are making energy efficiency a higher priority for second time buyers. This segment of the real estate sector has grown year on year driven by enhancing lettings income potential as well as the resilience of housing assets in the face of economic instability.

Whilst first time buyer numbers have remained static on account of market conditions, second property purchasers grew from 29 per cent in 2021 to 32 per cent in 2022 according to data from Bird and Co. Nearly a quarter were not buying these homes as main residences but rather opting for BTL, HMO, and holiday letting purposes.

A key consideration has been energy efficiency, with 61 per cent of respondents to a recent RICS survey finding homes rated for retaining heat and saving on power were holding their value. This trend is likely driven by rising energy costs, and increasing concerns about sustainability, with 40 per cent of respondents seeing greater interest from prospective buyers in homes that were more energy-efficient.

One key avenue for generating returns has been both the short and long term lettings market, which has gone from strength to strength. A balance of 28 per cent of respondents report higher tenant demand whilst new landlord instructions are falling, suggesting fewer properties coming onto the rental market.

Investors are seeing significant profits from becoming hosts on platforms such as Airbnb. However, this comes with void periods and significant uncertainty. In London for instance there is regulation prohibiting the use of AirBnB for more than 90 days, meaning short term landlords can only achieve a maximum occupancy rate of 24.65 per cent.

The regulatory macroenvironment, alongside consumer sentiment, looks set to favour long term letting options which maximise energy efficiency as well as affordability in commuter zones with quality developments available in areas such as Luton, Harlow, and Maidstone.

Cash investments will grow in popularity as they allow investors to combat the rising interest rates of mortgages that we witnessed in 2022. Not to mention, with rising interest rates comes an increasing demand for renters choosing not to buy in 2023. According to Zoopla, demand for rental housing is up 46% and with supply being down 38% in the UK, rent prices are set to continue to increase next year. The 2023 property market will allow investors to capitalise on this rising rental demand.

https://www.propertyinvestortoday.co.uk/breaking-news/2022/12/2023-property-market-insights-from-an-industry-expert

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