Real estate recovery underway, led by UK and Europe: M&G RE

The cycle has turned, the market has bottomed out and the UK is leading the world in real estate recovery, closely followed by Europe: this is M&G Real Estate’s optimistic view for 2025, as expressed at yesterday’s Global Real Estate Media Day at the group’s headquarters in London.

Martin Towns, Deputy Global Head of Real Estate, M&G RE

“We have stability of pricing now after a few challenging years,” said Martin Towns, deputy global head of real estate, M&G RE. “We are at an inflection point, as lower prices, rental growth in most places and healthy occupier markets are attracting buyers back.”

In the new property cycle global investors are recalibrating their portfolios with increased optimism and a keen eye on emerging trends and evolving dynamics. As capital values have stabilised and a recovery phase is underway in many global markets, positive sentiment and easing interest rates are setting the scene for a rise in buying, selling and lending opportunities.

The UK, always a first mover, is expected to lead the rest of the world in the rebound of real estate, with Europe following quickly on the path to recovery, according to M&G, while Asia is still lagging behind.

There is a risk that US tariffs, if they are imposed by the Trump administration, could lead to a spike in inflation and to a ‘higher for longer’ interest rate environment which could slow down the recovery, he said, but “there will still be a recovery” as investors see value and good returns in real estate.

Alex Greaves, Head of Residential, M&G Real Estate

“We see three big themes which present three big opportunities,” said Towns. “The first is residential, as there’s a housing supply squeeze across all markets. The second is cities in transition, with the chance to reimagine places and repurpose buildings. The third is financing the future, as the lending opportunity is here to stay and the share of non-bank lenders continues to grow. Real estate debt is becoming a permanent feature on investors’ radar screens.”

The strong fundamentals of the residential sector are well known, as demand exceeds supply across all markets and the asset class offers something for all stages of life, from student housing to co-living to renting, to owning a family home, to senior housing and retirement communities.

What is less well known is how little investment the sector attracts in the UK and Europe, said Alex Greaves, head of residential, M&G Real Estate: “In the US, around a third of all institutional capital goes to resi and it’s fast growing to 40%, while in the UK it’s 10% and ten years ago it was 1%.”

Resi as an investable asset class has grown enormously and there has been a visible shift from office to residential. “Finally there’s a recognition of the role of institutional capital in getting housing built, as the government has ambitious targets,” said Greaves, who is also chair of the British Property Federation’s Residential Committee.

The rental market in particular offers great opportunities, Greaves said: “In the UK the number of renters has grown by 100,000 a year for the last ten years and the direction of travel is not going to change.”

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