Contributing to this trend is the increasing presence of foreign investors in the PCL market, who are encouraged to invest given the weaker pound. Indeed, estate agency Carter Jonas says that property was 25 per cent less expensive at the end of September last year than it was in June 2021 for overseas investors.
As such, foreign buyers are capitalising on this trend and were responsible for 57 per cent of the investment into London property in 2022. This should continue, as favourable exchange rates could provide more relative bargains to foreign investors.
Another key factor that insulates the PCL market is the lack of supply. A shortage of stock continues to drive competition among buyers, particularly in the super-prime market.
Figures from agency Beauchamp Estates, for instance, forecast that demand for properties priced above £15m will grow by 30 per cent. Accordingly, values in the top echelons of the market will either remain flat or grow marginally by 1 per cent to 2 per cent, rather than falling like the rest of the market.
Another trend that could attract an influx of PCL buyers is rising rents. Indeed, many PCL buyers are buy-to-let landlords, and hence the prospect of higher yields is likely to attract more investors, particularly because demand is so high.
In fact, according to Knight Frank, the demand from new prospective prime tenants sat at 26.7 per cent above the five-year average in November 2022. As a result, PCL rental values enjoyed a 17.8 per cent rise in 2022.
Since the start of the pandemic, this represents a 23.2 per cent increase and growth is set to continue into 2023 – forecasts suggest 6 per cent in the PCL rental market, regardless of the wider economic landscape.
Final thoughts
Of course, the challenges faced by the property sector in 2022 remain, interest rates will rise further and continued economic and political uncertainty is highly likely. Yet, the appeal of PCL property has not diminished, keeping demand high against perennially low supply. The PCL market remains robust, and this should continue in 2023.
To help homeowners and investors prepare for the year ahead, whether they are domestic or international, lenders must be ready to anticipate and support their needs.
Indeed, this will require flexibility, and the lenders who can provide this are the ones who will be best placed to harness the opportunities of what could be a promising year for the PCL market.
