Overseas Investment in UK Property Hits Record Low: What That Means for the Market

The number of overseas buyers registering interest in UK residential property has fallen to its lowest level in recorded history. According to Knight Frank, foreign demand made up just 1% of total buyer registrations in Q1 2025. That figure marks a steep drop from the 2008–2014 period, when international interest — particularly in London — played a major role in propping up the market.

This is more than just a shift in sentiment. For developers, landlords, and anyone involved in prime or city-centre real estate, this could reshape exit strategies, pricing assumptions, and the makeup of the end-user market.

In this article, we’ll explore what’s behind the decline, what this could mean for property business owners across different regions, and what you can do to stay ahead of the trend.

What’s Driving the Drop?

Several overlapping factors are pushing foreign buyers out of the UK market.

First, changes to the non-dom tax regime have reduced the appeal of UK residency for international high-net-worth individuals. The government’s decision to wind down non-dom status means many of the tax advantages once enjoyed by overseas investors are no longer available.

Second, increased stamp duty for non-UK residents has made purchases significantly more expensive. The 2% surcharge introduced in recent years adds to an already heavy transaction tax burden, particularly in areas like London where average purchase prices are higher.

Finally, post-Brexit complications, currency fluctuations, and broader geopolitical uncertainty have made alternative property markets more attractive — especially those with clearer tax structures and better returns.

The result is a market where international interest has dwindled to record lows, with some exceptions depending on region and nationality.

London Feels It First — But Not Only

Central London has long been the magnet for overseas investment. In previous cycles, as much as 40% of new-build stock in areas like Mayfair, Knightsbridge, and Canary Wharf was purchased by non-UK buyers. In 2009, overseas applicants made up 7.9% of buyer registrations. That’s now down to 2.9%.

Developers who once relied on international demand to absorb premium units are starting to feel the pressure. This is particularly true for higher-end stock still in planning or construction. Marketing strategies that were once geared toward overseas exhibitions and foreign-language brochures are now being rethought in favour of local and domestic targeting.

Interestingly, North American interest is rising, now representing 16% of overseas buyer demand. That’s up from just 6% in 2008. But this is still a relatively small slice of the overall picture. The bigger trend is clear — and it’s downwards.

This shift is not limited to London. Regional cities, once touted as hotspots for global capital seeking value outside the capital, are also seeing declines. Some investors are still active in places like Manchester and Leeds, particularly where yields remain strong, but even here the pace has slowed.

Implications for Developers, Sellers and Lettings Businesses

If you’re a developer or operator who has previously counted on overseas buyers for off-plan sales or final exits, it’s time to reassess your strategy. There are three key areas to focus on:

1. Rethink Your Target Market

Overseas buyers, particularly from Asia and the Middle East, often valued different features than local owner-occupiers. Proximity to specific schools, airport connections, concierge services, and amenity-heavy buildings were strong draws. With local buyers now taking a more prominent role, design and layout choices may need to be revisited. Two-bed flats without parking in high-density blocks, for example, may not perform as well without international demand to absorb them.

It’s a good time to revalidate who your real end user is, and whether your stock reflects their needs.

2. Adjust Your Sales Timelines

One benefit of overseas demand was speed. Investors with cash could move quickly, buying units in bulk or off-plan to support funding phases. That liquidity cushion has now thinned. Sales cycles will likely take longer, and developers may need to build more time into their financial models.

If you’re relying on quick presales to meet lender thresholds or raise bridging finance, this drop in demand could impact your ability to proceed on schedule. Planning ahead and engaging with domestic marketing partners early will help manage the change.

3. Reposition Your Letting Strategy

Some overseas buyers purchased with the intention of letting out properties as long-term investments. In their absence, there may be more inventory coming back to the market or not being absorbed at all.

Lettings businesses and landlords may face more competition in prime city areas as a result, particularly if planned stock continues to be delivered into a softening tenant pool. Strong tenant relationships, better service standards and careful pricing will matter more than ever.

It’s Not All Negative: Opportunities in the Shift

While the loss of overseas interest presents challenges, it also creates space for new approaches.

• Domestic buyers now have less competition in central locations. This could encourage more UK-based owner-occupiers to move into areas once dominated by investors.
• Alternative finance and crowdfunding platforms might see an uptick in activity as developers look to replace lost international capital.
• Foreign direct investment from North America is on the rise. Developers and agents who understand how to market to this group — and address their legal, tax and finance concerns — could find new traction.

Additionally, for those holding off-market or undervalued assets, this cooling may offer a unique window to buy well, especially where schemes have stalled due to lack of foreign interest.

What You Should Do Now

If your business is exposed to foreign buyer trends, here are a few immediate steps to consider:

• Review your pipeline: If your exit strategy assumed a percentage of overseas sales, revise your projections now. It’s better to reset expectations early than scramble at the point of sale.
• Adjust your marketing: Focus messaging around lifestyle and domestic convenience, not international prestige. You’re more likely to convert local buyers by highlighting quality, long-term value, and liveability.
• Stay agile on pricing: Be willing to test different pricing strategies or incentives, especially on schemes with high exposure to foreign demand.
• Consider alternative funding options: If you’re seeking capital and international sources have cooled, explore domestic investors, family offices, or structured finance products tailored to UK-based developers.

Final Thought

The drop in overseas buyer interest is not a sudden collapse, but a slow and steady shift that’s been gathering pace for years. This is simply the latest milestone in that trend.

For property business owners, the key is not to dwell on the loss of international demand, but to pivot with clarity. The UK still has a deep and active domestic market. The developers, landlords, and operators who adapt early — with the right messaging, pricing and partnerships — will continue to succeed in this new landscape.