New research from Excellion Capital, the boutique debt advisory and investment firm, shows that UK real estate investors are furious with Labour’s “1930s approach to nationalisation and increased taxation”. But when high street lenders can’t provide the leverage they’re looking for, investors can rely on their own ingenuity to find paths to continued success, especially when the past month alone has given the UK genuine reasons for optimism.
In January 2025, Excellion Capital published the findings of its Investor Sentiment Survey January 2025, revealing that a resounding lack of faith in the newly-elected Labour government was causing investment confidence to plummet to unfamiliar lows.
Now Excellion Capital has recommissioned the survey to find out how, or if, investor sentiment has changed as we approach the halfway point of the year.
Who was surveyed?
Among the 584 UK investors surveyed, 67.1% focus the majority of their investment on the residential sector; 8.2% invest in the office space; 8.2% in retail; 5.9% in leisure and hospitality; 5.9% in mixed-use developments; and 4.7% in the industrial sector.
When it comes to their chosen strategy, the most common is investment (39.6%), followed by renovation (26.4%), development (13.2%), land acquisition (13.2%), and conversion (7.5%).
When looking to secure financing for their projects, an overwhelming majority of property investors prefer to approach banks and traditional lenders (64.1%). Meanwhile, 12.8% opt for private lenders, and a further 12.8% prefer joint ventures. The latter marks an increase from just 3.7% in January.
Meanwhile, only 10.3% of UK real estate investors choose to work with specialist lenders to finance their projects.
Confidence remains low
When asked to rank their current level of confidence with regards to taking on new investments in 2025 – using a scale of 1-10 on which 10 indicates maximum confidence – 27.8% rank themselves at the lowest possible level of 1.
This is a significant drop in confidence compared to the 17.9% of investors who ranked themselves at 1 when asked the same question in January.
Furthermore, three quarters of respondents (75%) ranked their confidence at 5 or lower, compared to 63.1% in January.
When asked to rank their confidence in taking on loans/financing in 2025, a staggering 48.6% put themselves at 1 (compared to 38.1% in January), but the proportion who rank themselves at 5 or lower has actually reduced slightly to 79.2% compared to 83.3% in January.
The suggestion here is that investors perhaps feel slightly more confident about taking on loans to sure-up existing assets, but remain wary about investing in new assets.
What is causing this lack of confidence?
When asked what they perceive as the biggest risks to achieving or completing on real estate projects in 2025, the most common responses are economic uncertainty (21.7%), regulatory or policy changes (21.7%), interest rates (15.8%), market volatility (11.7%), and inflation (11.7%). This is almost identical to the responses given in January.
So too are the responses to the question, ‘what do you see as being the biggest challenges when it comes to securing debt for your real estate projects?’, with high interest rates (16.5%), economic uncertainty impacting valuations (12.4%), and rising costs (11.3%) once again being the most common answers.
However, back in January, 9.6% of real estate investors said that strict loan-to-value (LTV) requirements and tightened lending criteria were a major challenge for securing financing, but today these concerns have been partially mitigated with just 5.2% citing it as a significant challenge.
Confidence in the government
Finally, respondents were asked to consider their confidence in the UK’s labour government and the impact this has on their real estate investment activities.
When asked how much confidence they have in the government’s ability to effectively manage the UK economy, 58.3% of respondents said they have little or no confidence. While this is nothing to be proud of for the government, it does reflect a slight increase in sentiment since January 2025 when 69% of investors had little to no confidence. However, instead of seeing an increase in confidence, there has simply been growth in neutrality, with the number of respondents describing themselves as neither confident or not confident rising from 14.3% in January to 30.6% today.
When asked what they think the Labour government’s priorities should be, increasing economic growth (15.5%) was the most common answer, followed by addressing the cost of living (14.2%) and, interestingly, reforming taxation (11.7%). This is interesting because in January this ranked as only the 7th highest priority for investors before leapfrogging to 3rd today.
All in all, however, optimism among UK property investors is low. The final question put to them was:
‘How optimistic are you about the UK’s economic future under the Labour government in 2025?’
A staggering 70.8% responded by saying they’re either somewhat or very pessimistic while less than 21% (20.8%) have any level of optimism whatsoever.
Ashley Marks, Head of Real Estate at Excellion Capital, comments:
“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.
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.
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.
Investors can feel further optimism due to the fact that the economic shock and uncertainty that came from across the Atlantic when President Trump first announced his huge tariffs seems to have subsided since he decided to soften his approach. To illustrate this, we can look at how 5-year swap rates have dropped by roughly 8% since the end of March alone. This is huge, not least when you consider that swaps only dropped by around 5% through the previous 11 months, even with multiple cuts to the Bank of England base rate coming during that time.
Another reason for optimism comes from the fact that lenders are now lending on apartment block break-up value rather than whole blocks, demonstrating increased lender confidence and opening up higher LTC for investors.
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.”
