The UK institutional real estate investment industry responded to UK Chancellor Rachel Reeves’ government budget announcement today with mixture reaction.
Melanie Leech, chief executive of the British Property Federation, spoke of the “disappointment” for developers and investors after Reeves confirmed it would introduce a surcharge on retail property rates above £500,000 (€569,000).
“Confirmation of the large property business rates surcharge will impact critical national infrastructure like logistics businesses and priority sectors identified in the government’s own industrial strategy,” she said.
“While it was always going to be a challenge for the Chancellor to both balance the books and support economic growth, it is disappointing that there was nothing introduced to alleviate acute development viability issues. Overall, no surprises, but nothing to cheer either.”
Paul Richards, CEO of the Association of Real Estate Funds, meanwhile, commended “the continued streamlining of the planning system – where Rachel Reeves correctly linked infrastructure and housebuilding to economic growth”.
He also welcomed the announcement to apply stamp duty relief to property transferred within local government pension schemes (LGPS). The tax relief is expected to be helpful where LGPS pools transfer property assets as part of ongoing consolidation efforts.
“This is a hugely technical measure, but it should be a big game changer for the savings of millions of hard-working Britons,” Richards said.
He noted disappointment in there being no reference to the Reserved Investor Fund (RIF). “We would like to have seen more support for the innovative RIF – because it’s designed to deliver government commitments to growth and sustainability – and the reinstatement of multiple dwellings relief,” Richards said. “The latter impedes commercial developers building new homes.”
Matthew Hall, senior director at Invesco Real Estate, said: “For all the hype, the implication of today’s budget for the institutional real estate sector are limited. There is the announcement of increased tax on investment and saving income – including property rental income – but this is targeted at smaller investors and buy-to-rent owners.
“Combined with the Renters Right Act 2025, this continues the pressure on private investor/landlords, continuing to erode the attractiveness of private investment in real estate for small-scale investors. Note that in our view this has virtually no impact for institutional residential investors, though is likely to reduce the number of smaller investors participating in the market and thereby marginally reduce competition.”
Nik Potter, associate for commercial research at Knight Frank, said: “From a capital markets lens, early market signals are steady rather than spectacular, but enough to calm nerves. Gilts may stay elevated in the near term, yet confidence is building that we could see easing from late 2026 into 2027. For commercial real estate investors, this hints at a shift from pure caution to more calculated positioning as investors will now start planning rather than pausing. Fiscal discipline is now as much about preserving confidence as it is about balancing the books. The market demanded that the government play the long game, and not swing for the boundary on every ball.
“The budget’s focus on infrastructure, innovation and productivity sends an important message that the UK is competing for global capital not just waiting for it. Strategic investment unlocks confidence and keeps the door open for private sector opportunities, particularly into real estate sectors with resilient income profiles and growth opportunities.”
