The UK’s residential market is set to see £16.5B of investment in 2022 despite a plethora of economic headwinds, a report by Knight Frank has said.

The property agent and consultant has said that the current residential market, which includes student housing, co-living, multifamily and single-family homes for rent, is “counter cyclical” in nature compared to offices and retail.

“Residential investment volumes will top a record £16.5B in 2022, up from the £10.2B spent in 2021,” the report said. “An additional £75B has been earmarked to deploy across the sectors over the next five years, equivalent to a doubling of current committed capital.”

Investors cited a lack of operational stock as one of the major barriers to investment, followed by competition within the investment market, and the impact that the ESG agenda is having across real estate as a whole.

Knight Frank warned that the impact of the war in Ukraine and hikes in energy prices was only just beginning to be felt in the UK’s construction and property market, with respondents expecting cost inflation to have an impact in the three months to June 2022. Planning delays were also cited as an issue.

The report also compared office refurbishment costs from 2017 and 2022, stating: “In 2017, the cost of refurbishing to modern standards equated to £104/SF. But by 2022, this cost has risen by 66% to £175/SF."

Increasing tender prices accounted for 16% of the increase in costs; however, a large percentage of the extra costs were related to new standards brought in over the last five years.