Cautious optimism from real estate firms, despite mixed outlook, could help drive gradual recovery
Research from leading audit, tax and consulting firm RSM UK shows that real estate and construction businesses remain cautiously optimistic, despite ongoing barriers to investment.
According to its latest Real Estate 360 report, a survey of over 270 business leaders in real estate, around two-thirds (64%) felt optimistic about market prospects, little change from the previous year (68%) despite persistent headwinds. Only 16% said they felt pessimistic about the outlook for the sector. When it comes to the longer-term outlook, over a third (36%) said they felt ‘very optimistic’ about prospects for the real estate sector over the next three years, compared to 33% the year before.
Despite optimism in the market, headwinds persist into 2026 and beyond. The biggest barrier to investment in the sector is ongoing economic volatility, cited by almost half (43%) of respondents.
Stacy Eden, partner and national head of real estate at RSM UK said: “Our survey results point to cautious optimism – sentiment that could help tip the balance in favour of a gradual recovery throughout the year. But barriers to growth won’t help. UK growth forecasts over the next three years are mediocre, with concerns around potential future tax rises, and minimal productivity growth in the UK. Additional tax restrictions were the second biggest barrier for 39% of respondents. This has been driven by the continued high and growing rates of taxation that the real estate and construction industry must deal with. While the budget could have been more penal for the industry, the mansion tax and 2% rise on landlord tax has followed previous tax rises around Stamp Duty and Residential Property Developer Tax.”
More positively, as interest rates gradually come down, a fifth (19%) say access to funding is becoming easier, up from 16% the previous year. The preferred options for funding in the real estate sector have shifted in the past year, with private equity no longer considered the most readily available source of funding, down to 30% from 38% the previous year. Meanwhile UK investors and family offices take the lead as the most readily available funding source at 34%, closely followed by high street banks at 33%.
Stacy Eden commented: “These figures highlight the attractiveness of real estate to UK investors and family offices, with total returns in excess of 7% per year.”