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Is London’s Position as a Leading Global Prime Property Market at Risk?

London Prime Property

London Property Market

In October, we conducted a survey in which over 100 high and ultra-high-net-worth individuals and investors were questioned about their perceptions of the UK and London prime property market. These individuals are located both in the UK and around the world. 

Traditionally, London's prime property market has been resilient, and property has continued to be seen as a prized high-value asset. London's reputation as a safe city with excellent amenities and its prominence as a global financial centre has always attracted international investors.

But is this still the case? 

Despite this long-standing narrative, 41.5% of investors reported that their confidence in London real estate had declined over the past year. This figure is more prominent when honing in on international investors. While high-earning individuals with incomes over £200,000 per year (56.1%) also expressed their concern for the London real estate landscape, especially in light of ongoing speculation regarding economic policy following the Labour’s election victory earlier in the year.

But is government policy really at the core of these sentiments? 

The data indicates that regulations and policies are the primary factors impacting investment decisions, with 51% stating these as the main driver of their decision as to whether to invest in London and the UK. 

With the Autumn Budget Statement right around the corner, Islay Robinson, CEO, sees this as a critical moment for the government to bolster investor confidence.

“While these findings are surprising, they illuminate a need for positive action to maintain London’s global stature,” Robinson stated. Adding, “the upcoming Autumn Budget 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.”

High interest rates and stricter lending practices could also be a contributing factor however. Increases in the cost of borrowing typically discourage potential investors and make property less accessible, although further interest rate custs now appear to be back on the horizon. The lack of affordable financing has arguable further intensified the market’s challenges, particularly in attracting new investors who view affordability as a core concern.

However optimism prevails

Despite these hurdles, a significant portion of investors stated that they remain optimistic about the market’s long-term prospects. Those individuals with a positive outlook highlighted the resilience of the UK economy. The continuous, stable environment with the UK was a compelling factor for many. The demand for housing, particularly in the industrial and residential sectors, remains high, underpinning the UK’s solid foundations in a challenging global economy. Reassuringly, the UK's economy is still viewed as an "anchor of stability".

With G7 status and consistent demand for real estate, these factors continue to attract long-term investment. One respondent noted; “The UK remains highly attractive to conduct business with, given its stable government, first-class culture, and outstanding education.”

A loud and clear message is that people are looking for consistent policy measures. 

“Given the current lack of detail, it’s unsurprising that many investors are cautious about the mooted policy changes, and the daily speculation surrounding them,” Robinson noted. 

Investors warn that significant tax changes could damage confidence further, deterring both domestic and international investment.

Robinson cautioned, “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.”

Despite current obstacles, the UK property market remains strong as an asset

Is it in the hands of the government? Promises within policy measures are to enhance affordability, boost accessibility, and offer clearer guidance on tax reforms. Outcomes that could put investors at ease. 

In summary, while London’s property market faces its share of challenges, the city remains a vital pillar of the UK’s economy and a leading force on the global stage. If policymakers take proactive steps to support and encourage investment, the market’s resilience and long-standing appeal can endure, strengthening London’s status for many years to come.

 

The views and opinions expressed in this piece are those of the author and do not constitute advise or a recommendation. They do not necessarily reflect the official policy or position of Enness and are not intended to indicate any market or industry viewpoints, or those of other industry professionals