Residential buy-to-let property in the North West is expected to be the top performing UK real estate asset in 2025 in terms of annualised returns, according to Savills’ annual cross-sector forecast.
The company also expects Central London and regional office assets to perform well in the coming year driven by the restrained supply of prime space in most UK cities and the expectation of yield hardening.
Savills has raised its outlook for the average total return for UK real estate in 2025, forecasting an average return of 7.4%, compared with 6.8% for 2024.
In total, 12 UK property sub-sectors are forecast to see annualised returns of more than 8% between 2025-2029 – an increase from eight sectors for the years 2024-2028.
James Gulliford, joint head of UK investment at Savills, said: “The 40-year high of inflation has passed, and most forecasters are predicting around 100 basis points of base rate cuts from now until the end of 2025. Both of these are good news for land and property occupiers and landlords, and should bring increased levels of transactional activity in many markets.
“However, the new government stuck its policy flag in the ground with the Budget, and while higher taxes to support public spending were never going to be a surprise, the details of this have been enough to cool some of our forward views a little. Overall, however, our outlook for 2025 and beyond is more positive than it was 12 months ago with more income and capital value growth on offer in most sectors.”
