The Pro’s And Con’s London Property As An Investor, A Buyer Or Someone That Just Loves Property
In the capital’s central areas, only the wealthiest can afford to purchase property, with prime London’s boundaries becoming increasingly more elastic.
“Prime,” up until a couple of years ago, strictly referred to those golden postcodes of Chelsea, Kensington, Knightsbridge, Belgravia, and Mayfair, but now wealth and desirability have spread and created “outer prime” areas stretching from Wapping to Wimbledon, taking in areas such as the burgeoning South Bank, Battersea, and Fulham.
House prices for prime central London are forecast to increase by an average of 12.5% over the upcoming five years. That compares with an average house price growth in the UK from 2018 to 2022 of 2.5%.
New high-profile developments are redefining areas that were once overlooked and setting new local price levels. For example, Stratford’s Manhattan Loft Gardens is part of the new cultural hub of east London.
Former industrial areas, which include Greenwich Peninsula and King’s Cross, are attracting current aspirational workers. The City Road area near Old Street is as well, which in the past was known for just being a grey and vast roundabout.
These areas have recently developed a new identity as a kind of dynamic tech hub, earning a following among those young financiers, who want to be near their City offices to walk to work.
Just the walkability factor alone has been a driver for City Fringe growth, where new high-rise luxury apartment blocks, such as Shoreditch and Aldgate, along with some of London’s most culturally diverse communities and historic streets.
Research into the biggest regeneration areas in London shows that increased price growth in that area outperforms the average for London over five years by 40%.
Where new areas that are being developed from scratch (or from urban scrubland at least) have seen the arrival of major cultural institutions or companies. Companies like Facebook and the US embassy in Nine Elms, along with the English National Ballet, are moving into London City and help to build confidence that investors and developers will follow suit.
The Brexit vote along with the increase in 2014 of stamp duty thresholds, and once again for buyers or second homes or investment properties in 2016 slowed numerous parts of the London market.
Uncertainty, like with Brexit, along with the reluctance of losing six (or perhaps even seven) figure sums to stamp duty has prevented many people from buying and selling.
What has emerged instead is a buoyant super-prime and prime rental market, which would-be buyers are biding their time until Brexit has becomes clearer.
Rents are expected to steadily increase by around 2.5% per year from 2020 to 2022, which is supported by an increasing trend of an increasing number of people choosing to rent by choice.
Also critical to the London market’s dynamics is an under-supply of new houses, with only about one-third of the total 66,000 needed are built every year.
For London investors, just as important is the Crossrail arriving later this year. Most of the potential increase in value has been factored into home prices already around the Elizabeth Line new stations, with those that start from a low base like Woolwich being some of greatest beneficiaries.
A strong economy, particularly after 2019, will continue driving house demand and pushing prices up. There will continue to be demand coming from wealthy internationals, while it is unlikely that overseas investors will be shying away from London due to Brexit.
London will continue to be a cosmopolitan and a key global city, a great place for conducting business, and a cultural icon.