As the UK real estate market emerges from a phase of downturn exacerbated by rising global interest rates, new data indicates a positive shift in capital values and investor sentiment. In 2024, overall capital values have risen by
1.8%, coupled with a total return of
7.7%, marking the start of a potential recovery trajectory. Investment volumes have also seen a significant increase, growing from £45 billion in 2023 to £54 billion in 2024, largely driven by heightened activity in the fourth quarter. A recent survey suggests soaring investor confidence, with 98% of those targeting the UK market planning to maintain or enhance their real estate acquisitions in
2025. Additionally, 88% are intending to sell similar or increased amounts, a critical factor for sustaining market liquidity.
However, the market is not without its challenges. A prevailing mismatch between buyer and seller expectations is leading to difficulties in price discovery, while uncertainties surrounding the geopolitical climate and the future path of interest rates loom large. Although one-third of market participants perceive the sector as having already initiated its recovery, conversations around continued resurgence are expected to intensify into late
2025.
In light of prior instability, capital raising for real estate investments has faced hurdles; nevertheless, approximately half of investors are inclined to boost their allocations in
2025. Sectors such as industrial and logistics, along with living sectors, are becoming increasingly sought after, reflecting a longer-term evolution in investment preferences. Additionally, there is a discernible shift towards diversification into operational real estate and alternative assets, including hotels and healthcare investments. Overall, while the sentiment around UK real estate investment is on an upward trajectory, stakeholders are advised to proceed with caution amid potential economic volatility.
