UK – Nearly one-fifth of investors expect the UK real estate market to become less attractive over the course of the next two decades, according to a survey commissioned by law firm Nabarro.
The more than 600 institutional investors surveyed by the law firm believed office and residential property would be equally attractive to investors over the next five years, with the two sectors nearly 9 percentage points ahead of the 35% of respondents interested in distribution hubs and other logistics units.
Nabarro further noted that the interest in residential property came despite the UK market being underdeveloped, "with institutional investors traditionally shying away from the sector".
"Overseas owners are used to a diverse residential market with high-rise urban developments, multi-family and condominium investments," it continued. "It is no surprise that they are attracted to some of the exciting London residential schemes."
The report, 'Who's Hungry for UK Real Estate?', however, revealed were mixed emotions regarding future investment in the market.
While 73% of respondents said the attractiveness of the country's property would increase over the next two years, viewed over a five and 10-year horizon, the figure fell to 64% and 45%, respectively.
Examining expectations over 20 years, only 38% felt there would be an increase, while 19% claimed interest would fall – doubling the number of pessimistic respondents over the two-year timeframe.
Ciaran Carvalho, head of real estate at Nabarro, accepted that the "real challenge" for the country would be over the longer term, despite its ability to enjoy growing confidence from investors.
"While positive changes are already taking place, the UK government needs to make sure we offer an attractive tax regime, less restrictive planning laws and a sensible immigration policy to ensure a strong development pipeline between now and then if the UK is to stand a chance of fighting off competition for global investment from emerging economies," he said.
The concern is underlined by 29% of investors citing the UK tax system as a deterrent to investment, followed by financial instability on the European Continent.
Respondents also believe Middle Eastern investors will drive inflows into the market.
Three-quarters of respondents cited the region as the main source of inflows, followed by Far and South East Asia.
The report also expressed surprise at some of the reasons given for investment in the country.
While economic stability was the main reason, cited by 79% of respondents, 73% cited the market's perceived liquidity.
"This is surprising given that liquidity in comparison with other investment classes, such as bonds and equities, is often cited as a reason why real estate comprises less than 10% of the total UK investment market by value," the report states.
"Perhaps this shows UK real estate has more liquidity compared with other countries."