UK property investment slumps amid economic uncertainty

UK property investment drops to a record two-year low as economic uncertainty fuels market uncertainty, according to a new report.

Commercial property consultants Lambert Smith Hampton reveal that purpose-built student accommodation helped a rather otherwise slow housing market.

The Build to Rent (BTR) sector saw a drop, but single-family rentals (SFR) properties, rented out to a single family rather than multiple families in apartment buildings, are growing in popularity in the UK.

Savills predicts that SFRs could reach 30,000 homes by 2027 and 70,000 by 2032.

No transactions above £400 million

According to the report, the drop in investment volume in the second quarter of 2025 was largely due to an absence of large-scale deals.

The report reveals that no transactions above £400 million were completed for the first time in five years.

However, a modest £8.8bn of property assets, including residential blocks, changed hands in Q2 2025, 6% down on Q1’s subdued total and the lowest since Q2 2023.

Lambert Smith Hampton says the slowdown reflected tariff concerns, a weak economic outlook, and persistently high gilt yields, all of which contributed to increased investor caution.

Significant opportunities

The largest deal of the quarter was the £390m joint venture between Unite Students and Manchester Metropolitan University, funding a 2,600-bed purpose-built student accommodation (PBSA) scheme at the Cambridge Halls site in Manchester.

While BTR investment volume fell by 10% to £961 million, the single-family rental sector was a bright spot, accounting for £670m of deals, with investors such as Lloyds Living active in the market.

Ezra Nahome, chief executive of Lambert Smith Hampton said: “The direction of travel for interest rates and finance costs is offering some encouragement for investors, but stubbornly-high gilt yields, elevated uncertainty and a lack of distress are prompting investors to sit on their hands that bit longer.

“That said, there are significant opportunities for those bold enough to act, including in the BTR sectors, where housing supply shortages, strong rental growth prospects and government planning reforms all support an attractive case for investment.”

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