In the decade up to the end of 2022, the average was for 53% of the purchases by value to be by non-domestic buyers, but in 2023 and 2024 this fell to 48%. This was, in part, due to the global reduction in interest in property investments as inflation and base rates spiked, but we believe that it was also connected to a reasonable perception globally that the UK was more economically and politically risky than some of its peers.
This leaves the new government with a relatively low bar to reach i.e. to look less chaotic than its predecessors! The return to a focus on creating an environment where growth can take place is a solid strategy, though the risk is that overtaxing the profits from that growth could nip it in the bud.
While reversing the macro trend that has been in place since 2016 will be slow, a recovery in international real estate investors’ perceptions of comparative risk and return will be easier, and more likely to evolve naturally from a return to low inflation, stronger economic growth, and a more centrist government. Thus, we expect to see a return to normal levels of inward investment in property from late 2024. In a European context, UK real estate now looks cheap, and that alone tends to drive capital flows.
