Cautiously optimistic: trends in the UK High Net Worth residential real estate market and outlook for 2025

The UK economy has been through the wringer in the last few years: consumer price inflation has been at record levels, and the housing crisis has been a major and particularly contested issue in the UK General Election. 

Affordability is a major factor in the non-prime residential property market, but this is much less of a concern for the High Net Worth and Ultra High Net Worth buyers. The prime and super-prime residential market is more affected by the availability of financing for investment. 

Things have been less busy in the last year, but practitioners remain cautiously positive in their outlook and investor outlook is also positive for the forthcoming year. 

Speaking with residential property lawyers and real estate professionals specialising in prime and super-prime markets for this year’s High Net Worth guide research, two major trends stood out: the national economic downturn, and a rise in overseas investment in the UK real estate market. 

Lawyers confirm that the market continues to be active in spite of higher interest rates, but say deals are slower in pace and lower in volume at the top end of the market. “We are moving to a new phase in the market where sales are taking more time and there are more challenges in getting transactions through,” says one source; “the macro trend in the market is really the slowdown in transactions.” Another source says deals are taking longer to complete because of buyers’ wariness to commit: “Everything is making people more wary of going ahead in deals – there are lots of price negotiations and things have shifted from a sellers’ to buyers’ market.” 

Tighter mortgage lending criteria and more expensive credit means that buyers with access to ready cash occupy a privileged position in the High Net Worth property market; more so than before. Explaining the rise in this preference for cash deals, a key practitioner says that “there is a bit of nervousness, and sellers want to latch onto people that can deal in cash; it makes them an attractive purchaser.” 

We are also seeing a steady rise in international property financing and investment. Given the still-high borrowing rates in the UK, a huge part of investment into the market has come from overseas clients. Introduction of more onerous compliance measures like the 2022 Register of Overseas Entities for UK real estate (that mandates disclosure of foreign property ownership or source of funds) does not seem to have deterred foreign buyers. 

Residential property lawyers overwhelmingly highlight the importance of international clients to the prime and super-prime London market. “Most money for super-prime properties is coming in from overseas,” says one, adding: “They do not seem to be thrown by financial markets or political turmoil; the potential for elections or tax hikes is not a concern to these investors.” Another reiterates, “with the weakening of pound this year, a lot of our overseas High Net Worth clients have been looking to buy UK property for the first time.” 

US investors are particularly active, taking advantage of the strong dollar. “Americans are back in town and spending money here, which has also increased substantially in the last year,” says one source; another adds that, “US clients have seen a lot of value for their dollar in purchasing. They typically like Belgravia and Notting Hill and get discounts of up to 30%.” 

Non-bank lenders are playing a greater role in commercial real estate finance and investment, including on debt finance for prime residential development. This can be seen in new funds like the Grosvenor and Generali Real Estate Residential Private Debt Finance Co-investment Strategy. This is a co-investment debt funding strategy launched as a response both to the lack of traditional sources and the heightened challenges in securing such funding where available.  

So, while there are still reasons to be wary, it seems the market is recovering from the lull and we are likely to see more activity, particularly in the super prime market, in the year to come. Practitioners highlighted the positive outlook emanating from a reduction in property prices as well as borrowing rates. The uncertainty surrounding elections is less of a concern now, and any changes in economic policy should provide greater clarity and confidence in the market over the next few months.