Nearly three quarters, 72%, of high net worth individuals (HNWI) feel optimistic about the UK’s real estate market, a study from a private bank showed.
Investec’s Future Property report, which surveyed 110 global HNWIs and entrepreneurs, found that almost all respondents, 99%, believed the UK was an appealing market.
London was the most attractive city to respondents, especially prime central London as cited by 95% of those polled.
There is also room for property prices to rise, respondents suggested, with 64% saying real estate capital values were at or very near the bottom.
Developer demand
Developer investment activity has increased in the last two years too, with a 23% rise in the industrial sector, 16% increase in the residential market and a 13% lift in office real estate.
However, the study found developers were more concerned about the obstacles to investment with 62% worried about land costs, up from a third in 2022.
Pivot to rental investment
The Investec study found that investors were most active in the residential sales market, with 98% currently investing.
The private bank said high interest rates had made it less affordable to buy a home, so investors were shifting to residential for rent investment. Its poll revealed that 96% of respondents were investing in this asset class compared to 84% in 2022.
This was the second largest increase in interest for any sector.
This was second to the purpose-built student accommodation (PBSA) sector, which saw a jump in popularity from 71% in 2022 to 87%.
ESG motivation
Investors felt social impact was the most important factor in environmental, social and governance (ESG) with 42% of respondents citing this as a priority when developing or investing in real estate. This was compared to 16% who felt carbon footprint was the most important factor.
Despite this, 80% of respondents believed minimum energy efficiency standards regulations should be a political priority.
Shivani Goolab (pictured), head of private client real estate at Investec, said: “Our latest private client report presents a compelling case for UK real estate, with a clear shift in sentiment from resilience against a volatile environment to one poised for activity. Although challenges remain, strong total return performance looks set to be driven by the supply/demand dynamics in multiple sectors, most noticeably residential, alongside the UK’s enduring appeal, asset repricing and an improving economic backdrop.
“While respondents’ views on the current investment landscape are more positive now than in 2022, they also demonstrate a belief that the outlook will improve further following next month’s general election and expected interest rate cuts, which should translate into a higher level of activity and improved returns across all sectors.”
Shekina is the deputy editor at Mortgage Solutions and commercial editor at Mortgage Solutions and Specialist Lending Solutions. She has nearly eight years of experience in the B2B publishing market, having previously covered the hospitality, retail, pet, accounting and jewellery sectors.
Shekina has worked for Mortgage Solutions and Specialist Lending Solutions for almost five years. Here, she covers the market’s breaking news stories, engages with professionals in the sector, and oversees any commercially agreed content in partnership with mortgage-related companies.
This includes presenting webinars and hosting roundtable discussions on developing themes in the mortgage sector.
She is an NCTJ-trained journalist and was nominated for the Headline Money Awards Mortgage Journalist of the Year in 2021.
In her spare time, Shekina likes to read, travel, listen to music and socialise with friends.
She currently reports on current events in the mortgage market and liaises with financial clients to produce sponsored content.
Follow her on Twitter at @ShekinaMS