We think so, and it looks a lot like bricks and mortar. With data supporting that real estate prices in the key US and UK markets have found their footing, coupled with the prospect of interest rate cuts, now could be a particularly opportune moment for Islamic investors to cast their gaze towards real estate.
The financial landscape has certainly been shifting. Major institutions like JPMorgan have described the start of 2025 as a “bumpy ride” for equities, with volatility remaining elevated. While the global Sukuk market shows resilience, with S&P Global Ratings forecasting issuance between US$190 billion and US$200 billion this year, Fitch Ratings rightly notes it isn’t entirely immune to global volatility.
Adding another layer is the interest rate environment. The Bank of England already trimmed its rate to 4.5% in February, and the IMF predicts further cuts are likely. Across the pond, while the Fed holds steady for now, signals suggest cuts could resume later in the year. Lower financing costs would provide a welcome tailwind for real estate, most likely boosting demand and values.
And what about the property markets themselves? Buyers seem to be adjusting to the new normal, suggesting a potential turning point. Furthermore, this period of adjustment can create attractive buying opportunities, as some motivated sellers facing pressures from the broader economic volatility may be more willing to negotiate on price than they might have been previously, allowing for potentially opportunistic acquisitions.
This potential turning point has not gone unnoticed by savvy investors, particularly those from the Middle East who are increasingly active in these markets. Reports suggest GCC investment into UK real estate alone is expected to surge, potentially exceeding US$4 billion annually, driven by these same factors of falling interest rates and lower pricing.
We are seeing tangible evidence of this renewed interest. For instance, Middle Eastern buyers reportedly made up a record 14% of overseas residential purchases in Great Britain during the first quarter of 2025. On the institutional side, Investcorp Capital announced in February 2025 the acquisition of four US student housing properties for over US$300 million.
Explaining the move, CEO Tim Mattar highlighted the sector’s strong performance and fundamentals: “The student housing sector continues to perform well, and we believe the robust fundamentals of this asset class will translate into strong performance and compelling risk-adjusted returns for investors”.
Beyond the immediate market dynamics, real estate boasts a compelling characteristic: historically lower volatility compared to other asset classes. While not immune to fluctuations, property investments have traditionally been far less volatile than equities. Research often places real estate’s performance between stocks and bonds, but crucially, it tends to offer bond-like yields with lower volatility. In today’s uncertain climate, this relative stability is a significant draw.
So, pulling it all together, the picture for US and UK real estate in 2025 looks increasingly interesting for the Shariah conscious investor. The combination of volatility in other major asset classes, the potential easing of interest rates, property price stabilization and possible opportunistic acquisitions, are creating buying opportunities in key international markets, bolstered by renewed investor interest from regions like the Middle East. All this suggests that now is indeed a promising time to consider anchoring part of an Islamic investment portfolio in the tangible security of property.
Written by Philip Churchill, first published in Islamic Finance news Volume 22, Issue 18 dated 7th May 2025.