Real estate investor sentiment is improving across all sectors…

The sentiment of lenders and investors has improved compared to 12 months ago, according to advisory firm Savills.

The company’s survey suggests there is greater enthusiasm for lending and investment in the housing, development and premium logistics sectors.

Price sentiment also improved across all property sectors compared to last year.


Nick Harris, Savills director of UK and cross-border valuations, says: “Positive sentiment is returning, with London’s lending and investor communities most favoring the housing, housebuilding and prime logistics sectors. Notably, the divergence of views on where markets are heading has decreased across most asset classes, suggesting that greater comfort with price discovery has been achieved.


Savills notes that 2023 ended with around £40 billion of assets traded, a significant decline from historical levels. And despite early optimism for the 2024 market, Q1 2024 transaction data represented the lowest Q1 levels in 12 years.

However, some significant deals have been made and volumes are expected to improve as the year progresses and the economic recovery continues.


The number of new loans was the lowest since 2012, with a recent survey showing that only around £32.6 billion had been made, down by a third compared to 2022. Much of the activity was focused on refinancing, with many lenders increasingly cooperated more with its borrowers to restructure loans.


Harris continues: “We have seen some forbearance from lenders, but clearly these historical lending positions need to be addressed at some stage. Many lenders have told us they expect to see much more activity in this area over the next 12 months.

“Of course, with higher borrowing costs and declining values ​​in many sub-sectors, when investors come forward to refinance or restructure a loan, there is a risk that a discrepancy will emerge between the level of debt required and that of lenders. are willing to offer, which raises the question of how the funding gap will close over the next few years.”


Referring to the commercial property market, Mat Oakley – director of commercial research at Savills – notes that although investment volumes in the UK have increased from a low level in the third quarter of 2023, and capitalization rates for prime properties have started to increase, investment activity continue to hamper the expectations of both countries and the hunt for misfortune.


He comments: “The period following the Great Financial Crisis suggests that distressed selling will peak in the next few years. Some sectors will recover more quickly as interest rates fall, particularly in sectors where there is belief or mispricing, and we are already starting to see increasing gains in retail warehouses, industrial facilities and hotels.


On pricing, Savills notes that the market remains cautious until trading volumes normalize, but believes prices are at or near the lowest levels for many of the UK’s best sectors.

Overall, prices are currently approximately 25% lower compared to June 2022, although they vary significantly by sub-sector.


From a residential perspective, Savills highlights that there has been a reversal in pandemic trends, with commuter locations performing better than rural and lifestyle locations. In London, flats are outperforming houses, with UK house prices set to increase by 21.6% by 2028.


£4.5 billion was invested in the build-to-rent sector in 2023, the second highest figure on record.


Emily Williams, director of Savills’ housing research team, says: “The UK housing market has performed better this year than many expected, with the anticipated cut in interest rates and improved economic prospects creating greater scope for house price growth.”