Ben Nichols, Managing Director of RAW Capital Partners, reflect on the year ahead and what it might bring for international buyers considering property investments in the UK in 2025.
The outlook for global property investors has improved considerably in recent months, and the UK property market has continued to reinforce its reputation as a resilient investment destination.
Indeed, recent economic developments have bolstered confidence in the market. For example, the Bank of England has cut the base rate twice since August 2024, while inflation, though not fully under control, is now sticking closer to the Bank’s 2% target.
On the political front, the new Labour government’s strong parliamentary majority and commitment to housing have fostered a greater sense of stability, even though the Autumn Budget and the policies announced have prompted some short-term uncertainty.
As a result, the UK property market has entered a period of stabilisation and growth. Property prices are rising, with Halifax reporting a 1.3% monthly increase in average prices in November to £298,083 – a record high. Meanwhile, buyer demand was 24% higher last month than the same period in 2023.
Such performance is indicative of the resilience and desirability of bricks and mortar in the UK, which is why it has historically been attractive to international investors from all corners of the globe.
So, as we approach the end of this year, what could the new one hold for international investors in the UK property market?
Interest rates should continue to fall
The sharp rise in borrowing costs has been a significant challenge for property investors – or at least those who are not cash buyers. However, Bank of England Governor Andrew Bailey recently indicated that the central bank is preparing to cut the base rate by 25 basis points four times next year. In turn, global investors should find financing options to be more affordable as lenders reduce their rates in line with the central bank.
Moreover, with the Bank of England likely to cut rates at a different pace compared to other central banks, the pound could weaken against other currencies. This could make the UK property market even more attractive for global investors with holdings in other currencies, as the favourable difference in exchange rates could create some opportunities to purchase assets at relatively lower prices.
On a more general note, the economic confidence and optimism that is created by just one rate cut – let alone four – should lead to greater economic growth. I expect this trend to create a more stable investment landscape in the UK that will be more conducive to a healthy and growing property market.
Investors’ tax and regulatory burden will increase
Admittedly, this growth could be tempered slightly by the ramifications of the Autumn Budget.
The Budget prompted fresh concerns about a potential exodus of overseas landlords due to increased taxes and regulations under a new Labour government. The abolition of the non-dom tax status, for example, is one of the most significant changes, but the government has indicated that it will be replaced by a temporary scheme aimed at incentivising high-net-worth individuals (HNWIs) and investors to remain in the UK. The devil will be in the detail, but this could encourage overseas landlords to maintain or expand their buy-to-let (BTL) portfolios in the UK.
Elsewhere, the introduction of new Energy Performance Certificate (EPC) requirements could result in higher costs if landlords need to renovate properties in order to stay compliant. Meanwhile, if passed, reforms to Section 21 could complicate tenant management, particularly for investors who reside outside the UK.
This potential increase in the tax and regulatory burden could result in a reduction in demand from overseas, as some commentators have suggested. However, despite these challenges, I think it’s more likely that the prospects for significant growth over the next few years will outweigh these additional hurdles.
The market is preparing for further growth in 2025
Indeed, the ‘mass exodus’ argument ignores the biggest draws of the UK market for global investors – its stability and potential for strong returns, both in terms of capital growth and rental yields.
Looking to 2025, global investors can be cautiously optimistic that both indicators will rise in the coming months. Indeed, Savills has forecasted a 4% increase in prices in 2025 and, by the end of 2029, it expects average UK house prices to have grown by 23.4%.
Meanwhile, rental values are also predicted to rise by 4% in 2025, further underlining the appeal of the UK’s BTL sector. BTL has consistently attracted a significant share of foreign investment; we expect this trend to continue as demand remains high and borrowing costs decline, which could in turn lead to improved yields.
Demand from overseas should remain strong
With these levels of growth on the horizon, there is every reason to believe that globally investors will continue to be drawn to the UK’s BTL market. The country’s stable economy, transparent legal system, high-quality universities and professional opportunities, combined with the long-term track-record of bricks and mortar as an asset class, all combine to create enduring appeal in this sector. And while regulatory and tax reforms will create new challenges, those core fundamentals are likely to mean that a healthy number of investors from around the world will regard the UK property market with interest.
Supporting this, according to some London estate agents, political developments in the United States – namely, the re-election of Donald Trump – is creating a wave of demand from Americans looking to avoid the uncertainty of a Trump administration. The same can be said for European investors, who’s assets and capital may be impacted by political instability and geopolitical conflict on the continent in 2025 and may see the UK as a more stable option.
Lenders must provide flexibility
Looking ahead, it will be intriguing to see how the UK’s BTL market adapts after a sustained period of political and economic change. The signs suggest that greater stability will allow for a more productive year for the UK property market in 2025.
The challenge for lenders and brokers is to collaborate and double-down on support for overseas investors, bringing together clear communication, educational services, and tailored lending solutions. By offering flexible terms and competitive rates, but also helping clients keep up-to-date with the latest changes from the UK BTL sectors, lenders can empower international investors to enter the UK market with confidence next year.
Ben Nichols is the Managing Director at RAW Capital Partners. RAW Capital Partners is a Guernsey-based specialist investment manager primarily responsible for managing the RAW Mortgage Fund, a Guernsey open-ended collective investment scheme that offers attractive and consistent returns, a high level of capital security, and total fee transparency.
