"The upcoming Autumn Budget statement 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"
- Islay Robinson - Enness Global
A new study by high-value finance brokers, Enness Global, reveals a nuanced picture of investor sentiment towards London's prime property market, highlighting both challenges and opportunities for policymakers.
The study, undertaken amongst over 100 investors in the London prime property market, both from the UK and around the world, made the following key findings:
41.5% of respondents reported decreased confidence in London property as an asset class over the past year
The decline is more pronounced among international investors (53.1%) and high-earners over £200,000 (56.8%)
Confidence in London as a prime investment location over the next 5 years averages 5.5 out of 10
51% of respondents cited government policy and regulation as the primary influence on their future investment strategies
London’s global ranking as a top location for super prime property has remained extremely resilient, alongside New York and Dubai in recent years. Despite these figures, the study underscores London's enduring appeal, bolstered by robust house prices at the upper end, significant infrastructure investments, and the city's reputation for safety and excellent amenities.
Investor confidence not increasing year on year
Investor confidence in London’s property market has not increased year on year, with 41.5% of respondents reporting their confidence has decreased from previous highs.
This drop is particularly stark amongst those from outside of the UK, with almost 53.1% saying their confidence in the London property market has decreased, this rises to nearly 57% amongst higher earners (those earning over £200,000 per year). Additionally, only 14% of Londoners have increased their confidence in the London market, lower than those in the rest of the UK and the rest of the world.
Confidence in the wider UK market is also dipping
Confidence in the wider UK market has also seen a decline, with almost half of respondents saying their confidence has decreased in the past year. Surprisingly, 0% of Londoners reported an increase in confidence outside of the capital, with only 9% of high earners saying they had increased confidence in the UK market.
58.1% of those from outside of the UK report their confidence in the UK has decreased, although by contrast 26% increased in confidence, suggesting there are mixed feelings about the UK and it may be faring better versus other global investment destinations.
When asked to look to the future, investors were wary about the London market over the next five years.
Respondents rated their confidence in London as a prime investment location at an average of 5.5 out of 10. This dropped to 5.4 and 5.2 respectively when looking at respondents outside of the UK and those earning over £200,000.
Amongst the respondents who rated their confidence as low, two prevailing views emerged: political concerns with the Labour government and economic instability, particularly high interest rates.
Many respondents believe that the potential policies of the Labour government (e.g., increased taxes and more red tape) will have a detrimental impact on the property market. In terms of economic instability, there's concern about the UK's economic outlook, with respondents predicting a worsening economy in the next 5-10 years. High-interest rates and reluctance from lenders to approve mortgages are seen as critical barriers to market growth, making property even less affordable and discouraging investment.
Of those who are confident about the market over the next five years, the key main reasons are strong demand, investment potential, and the stability and resilience of the market.
The more positive respondents believe that the UK property market remains a strong investment opportunity, due to the consistent demand for housing, especially in industrial and residential sectors.
Respondents also emphasised the stability of the UK economy, highlighting it as a G7 country with a knowledge-based economy and a stable government that supports growth.
One respondent said: "The UK remains highly attractive to conduct business with, given its stable government, first-class culture, and outstanding education.”
Government policy and regulation is key to building confidence
The overwhelming message coming from investors is that government policy and regulation has a significant influence on investor confidence.
This highlights the opportunity for targeted policy interventions to bolster London's appeal, particularly to overseas investors and high-income individuals who significantly contribute to the UK economy.
Islay Robinson, Enness Global Group CEO, commented: "While these findings are surprising, they illuminate a need for positive action to maintain London’s global stature. The upcoming Autumn Budget statement 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. London remains a jewel in the UK's crown, and with the right policy framework, we can ensure it continues to shine on the global stage."
The study also reveals mixed sentiments about rumoured policy changes, with 32.7% of respondents showing no particular enthusiasm for many of the speculated Budget reforms.
However, international investors express interest in potential changes to wealth tax, non-domiciled status, and property tax.
Robinson added: “Given the current lack of detail, it’s unsurprising that many investors are cautious about mooted policy changes. We hope policymakers recognise the vital importance of bolstering confidence in our property markets and seize the opportunity to drive investment. Uncertainty is never helpful and the mood music so far, even considering the recent Labour conference, has been extremely downbeat.
"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."
A thriving London property market is crucial for the entire country, bringing investment, jobs, and substantial tax revenues. Enness Global calls for policies that enhance London's unique position, particularly in attracting overseas investors and high-income individuals who play a vital role in driving economic growth.
As the property market navigates these uncertain times, all eyes will be on the government's autumn Budget, which may prove pivotal in shaping the future of London's prime property landscape.
