Excellion Capital’s Investor Sentiment Survey found that UK real estate investors remain frustrated with the Labour Government’s approach to nationalisation and higher taxes.
The survey revealed that confidence in the market had dropped since January.
Survey showed that the majority of investors, 67.1%, put their money into residential, while 8.2% each invested in office or retail, 5.9% in leisure and hospitality, 5.9% in mixed-use, and 4.7% in industrial.
Most investors, 39.6%, focused on investment, while renovation was chosen by 26.4%, with development and land acquisition both at 13.2%, and conversion at 7.5%.
When it came to funding, 64.1% preferred banks or traditional lenders.
It also found that private lenders and joint ventures both rose to 12.8%, with joint ventures up from 3.7% in January.
Just 10.3% of investors used specialist lenders.
Additionally, when asked to rate their confidence in taking on new investments in 2025, 27.8% rated themselves at the lowest level of one, up from 17.9% in January.
Three quarters rated themselves at five or lower, compared to 63.1% earlier in the year.
For loans or financing, 48.6% gave themselves a one, up from 38.1%.
However, the share rating themselves five or lower dropped slightly from 83.3% to 79.2%.
Furthermore, investors said the biggest risks to completing projects in 2025 were economic uncertainty and regulatory or policy changes (both 21.7%), followed by interest rates (15.8%), market volatility (11.7%), and inflation (11.7%).
The challenges in securing debt were high interest rates (16.5%), economic uncertainty affecting valuations (12.4%), and rising costs (11.3%).
Meanwhile, fewer investors were concerned about strict loan-to-value (LTV) requirements, with only 5.2% citing it now, down from 9.6% in January.
Research also found that 58.3% of respondents said they had little or no confidence in the Government’s ability to manage the economy.
This was an improvement from 69% in January, but more investors described themselves as neutral, up from 14.3% to 30.6%.
When asked what the Government’s top priority should be, 15.5% said increasing economic growth, 14.2% chose addressing the cost of living, and 11.7% picked reforming taxation, which moved up from seventh place in January to third.
On optimism for the UK’s economic future under Labour, 70.8% said they were somewhat or very pessimistic, with only 20.8% expressing any optimism.
Ashley Marks, head of real estate at Excellion Capital, said: “As we approach the halfway point of 2025, real estate investors in the UK remain unimpressed with the Labour government.
“The mood was hesitant back in January, and continues to be so today.
“But we are seeing a couple of important variations in sentiment that are worthy of discussion.”
Marks added: “First, the survey responses show an increase in the number of investors turning to joint ventures to fund their projects.
“To us, this suggests that investors are trying to overcome the lower leverage available from high street lenders by bringing in an equity partner who can help them gain leverage.
“Or, they have shifted focus to assets which are difficult to obtain bank finance for, such as land without planning.”
He said: “Despite this, investors are feeling more buoyant with regards to the LTVs lenders are offering.
“Back in January there was concern that they were on a long-term downward trend, but we are now seeing some lenders increasing LTVs to as high as 80%.
“This is vital knowledge because it indicates lender optimism – a higher LTV means that they expect rates to fall and values to rise.”
Marks noted that investors could take encouragement from the recent drop in economic uncertainty, pointing to President Trump’s softer stance on tariffs and an 8% fall in 5-year swap rates since March.
He also said lenders were showing more confidence by lending against apartment block break-up values instead of whole blocks, allowing investors higher leverage.
He added: “So while we hoped that the Labour government would show more desire to instil optimism in the real estate market, things are still starting to look up.
“Starmer may be wielding a 1930s throwback approach to nationalisation and increased taxation, seemingly hellbent on creating roadblocks to prosperous real estate investment, but we fully expect investors to keep demonstrating their innate ingenuity to navigate paths around these obstacles.
“At Excellion, we stand ready to work with investors to facilitate continued success in the face of adversity.”
