Savills reveals which buy to let region it tips for best returns

Residential buy to let in the North West of England, London industrial property and retail warehouses are set to be the UK property market’s top performers this year according to Savills.

All will secure annual investment returns of between 8.5 and 9.2 per cent between 2024 and 2028.

The agency’s annual cross-sector forecasts suggest a stronger outlook and opportunity for UK property investment in 2024 as interest rates steady. But returns will continue to be driven by income potential instead of capital growth.

It says turbulence in the mortgage markets, an uncertain planning environment, increased build cost inflation and regulatory changes in the private rented sector, suppressed transactions and growth in the residential sector in 2023. 

But with inflation heading back towards the Bank of England target of 2.0 per cent and more stability in the mortgage markets, Savills expects to see the primary sources of financial disturbance ease back over the course of next year.

Despite tougher conditions for landlords, with Savills forecasting rents to grow by a further 18.1 per cent by 2028 there is still significant opportunity for those less reliant on debt, particularly for those with a portfolio furthest from London, with Savills forecasting 9.2 per cent returns for the North West.

But struggles in the private rented sector are also expected to spur on institutional landlords, and both Build to Rent and Purpose Built Student Accommodation are expected to play an increasingly important role looking forward, says Savills.

Richard Merryweather, Savills joint head of UK investment, comments: “The factors that drove falls in UK property values and transaction levels over the last two years are expected to improve in 2024. There will be significant opportunity – especially in the commercial and residential spaces – for investors to buy at the bottom of the market, with a focus on opportunities where capital values have either over-corrected, or where rental growth prospects might be accelerating.

“The UK is one of 40 counties that is expected to have an election in 2024 which often causes investor uncertainty. However, our analysis suggests that although transactional activity is generally lower than normal in the three months prior to the election date, it recovers over the following six months.

“The rationale for investing in land and property remains good, particularly for investors who are looking for infrastructure-type investments that deliver comparatively predictable income streams over the long term. A rising interest in food security and carbon reduction is likely to boost investor interest in these segments. We are seldom able to see the bottom of any cycle this clearly, but we are confident that 2024 and 2025 will be the years in which normal service will be resumed.”