Despite economic and political uncertainty, the UK is still amongst the epicentres of real estate activity globally. While some UK investors have started to flirt with international opportunities, an overwhelming majority will continue to focus on domestic markets over the next two years.
London still offers opportunities for long-term investors. But as yields and available stock narrow, investors are looking towards Manchester, Bristol and Edinburgh for better opportunities. Large-scale infrastructure projects and new asset classes, such as the Private Rented Sector (PRS), are critical catalysts for sustainable returns.
Friction points have begun to emerge, however. Significant gains have become harder to find. Decision timelines have stretched and prevailing uncertainty has made investors more selective. Long-term income is taking priority over capital growth as the strategic goal. Many now choose safe havens over high-yield, high-risk assets.
Government action over the next two years will be critical to continued investor confidence. Alongside political and economic volatility, the tax system has become a growing area of concern. Extra restrictions, such as tax on capital gains made by overseas investors, are widely seen as the biggest barrier to investment.
Over the past 12 months, new restrictions on deductible interest and updates to Stamp Duty Land Tax have caused further hurdles for institutional and private investors. Growing complexity has already pushed up costs. In a challenging operating environment, further pressure will only undermine productivity and growth.Download the full Real Estate 360 report.