Feature
A growing symphony of voices have coalesced around the notion that the outlook for UK residential property is increasingly appearing grim. On account of the declining house price growth, the biggest monthly fall in two years being reported by the Financial Times, as well as the slowest growth in house prices in 4-years as of June of 2025, have all militated toward the abstraction that the prospects for the sector are bleak (FT, 2025a; BBC, 2025a). This has been coupled with increasingly negative outlooks in particular for the buy-to-let (BTL) residential sector where mortgage applications for BTLs have experienced declines for the last 11 consecutive months and where, generally, BTL mortgage demand seems to have stagnated (FT, 2025b).
The Labour government’s approach to the sector has been seemingly ideological and is evidenced in its legislative agenda which is increasingly characterised by policies seeking to increase landlord regulation and to enhance the rights of tenants, both objectives being embodied in the upcoming Renter’s Rights Bill, currently making its way through parliament. Taken together, these factors have cast something of a shadow upon the UK property market. Nonetheless, we believe that there are certain opportunities that remain in the broader UK real estate sector and we have taken the liberty of highlighting these:
- Capital Flight: The well documented flight of capital away from UK property to other asset classes has served to, in the shorter term, decrease house prices and is likely, and somewhat counterintuitively, to facilitate upward pressure on rents in the country as the growth in the supply of rented accommodation dries up. Accordingly, we contend that the privately rented sector, in contrast to the aspirations of the government, may be set, over the coming months, to deliver higher yields, as rents increase in line with the anticipated general reduction in the number of landlords (FT, 2025).
- Chronic Lack of Housing Stock: Despite the stated intentions of numerous successive governments to broaden the housing stock and, generally, increasing the supply of homes, data strongly suggests that demand continues to outstrip supply and that, accordingly, the housing shortage is still very much with us (UK House of Commons, 2023; FT, 2024). As a result, we believe there will be continued sustained demand for housing given the characteristics of the current market.
- Interest Rate Projections: The projections for the Bank of England’s benchmark interest rate clearly signals a series of predicted rate cuts. This will, in all probability, be largely on account of the two consecutive months of negative GDP growth experienced in June and the edging up of unemployment in the most recently released ONS estimates, in addition, wage growth decreases have served to reinforce the necessity for a gradual easing of monetary policy (ONS, 2025; BBC, 2025b). These factors suggest that the BOE will have sufficient incentive to decrease interest rates thereby increasing the yields and, accordingly, the attractiveness of investments into the UK real estate sector.
In light of these observations, we believe that a credible and compelling case can be found to invest in UK property. We will continue to observe the trend in the sector and will report our latest analysis.