More than two in five (41.5%) investors have lost confidence in London property as an asset class over the past year, a study by high net worth brokerage Enness Global has revealed.
The decline is more pronounced among international investors (53.1%) and high-earners over £200,000 (56.8%).
Half of respondents (51%) cited government policy and regulation as the primary influence on their future investment strategies.
Islay Robinson, chief executive of Enness Global Group, said: “While these findings are surprising, they illuminate a need for positive action to maintain London’s global stature.
“The upcoming Autumn Budget statement presents a golden opportunity for the government to announce policies that can reinvigorate investment in London’s property market and help fuel the wider UK economy.
“London remains a jewel in the UK’s crown, and with the right policy framework, we can ensure it continues to shine on the global stage.”
High interest rates and reluctance from lenders to approve mortgages are seen as critical barriers to market growth, making property even less affordable and discouraging investment.
Of those who are confident about the market over the next five years, the key main reasons are strong demand, investment potential, and the stability and resilience of the market.
The more positive respondents believe that the UK property market remains a strong investment opportunity, due to the consistent demand for housing, especially in industrial and residential sectors.
Respondents also emphasised the stability of the UK economy, highlighting it as a G7 country with a knowledge-based economy and a stable government that supports growth.
One respondent said: “The UK remains highly attractive to conduct business with, given its stable government, first-class culture, and outstanding education.”
The overwhelming message coming from investors is that government policy and regulation has significant influence over investor confidence.
Robinson added: “Given the current lack of detail, it’s unsurprising that many investors are cautious about mooted policy changes.
“We hope policymakers recognise the vital importance of bolstering confidence in our property markets and seize the opportunity to drive investment.
“Uncertainty is never helpful and the mood music so far, even considering the recent Labour conference, has been extremely downbeat.
“Significant changes to inheritance tax, capital gains tax, and VAT exemptions that further increase the tax burden could potentially damage already waning confidence and have many unintended consequences.
“I believe these findings are a warning that London’s enduring appeal and strength should not be taken for granted.”