Is London Property the Best Investment?

If you’re thinking about investing in property, is London the place to do it? With widespread issues in the property market, any investment in property is a risky business, but new figures have revealed that London property prices have continued to rise, with the gap between these properties and the rest of England being larger than previous years.

The figures produced by Savills estate agents show that despite uncertainty in the property market, investment in London property could now be stronger than ever. In previous years, the prices of property in London would normally set the precedent for what would happen to the rest of the country – with prices increasing or decreasing there first, followed by the rest of the country. However, it now seems that this trend has been broken, with prices not just being higher than the national average for the past five years but with the prices moving completely opposite to the rest of the country.

Knight Frank estate agents revealed that in London house prices have risen by 6% in the last five years, whilst the rest of the country has seen an 11% decrease. This difference becomes even more accentuated when prices in the more expensive areas of London are analysed. For example, in just five years a 37% increase has been seen in areas such as Chelsea and Kensington. These high prices run more like those in other affluent cities such as Hong Kong and New York.

Speaking about these trends, head of Savills Fulham, Lindsay Cuthill, commented: “It is the strength of demand from overseas buyers that has driven up prices in central London boroughs and underpin this market…Prime areas – like Chelsea, Westminster, Hammersmith, Camden and Fulham – have a relatively low correlation with the rest of London, let alone the rest of the country, suggesting they really are in a world of their own.”

This is supported by de Candole Residential’s recent statistics, which suggest that of those London properties priced at £2million or more, half of them are purchased by buyers from overseas. Equally, these buyers are also responsible for buying 7 in 10 of those London properties that are sold for over £10million. This is predominantly seen from the Middle East, Russia and from increasing amounts of European investors.

Supply and demand is the largest factor in property prices and with many planning restrictions in place in the centre of the capital there is a great lack of supply. Recent trends have also added to this; for example, many have made larger homes from flats.

Also opposite to the trend in the rest of the country is the number of ‘unsold’ homes in the region, with 30% fewer left unsold in London. This is thought to be because many people who buy property in London won’t sell it as profits made from renting the property out are very attractive.

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Furthermore, the strength in some of the prices in particular boroughs of London has moved into other areas of London along with some of the towns where many commuters live. Speaking about this, de Candole Residentials, Andrew de Candole said: “There has been a ripple out to some outer London postcodes and along the commuter belt. Most of these sales have come from UK home owners selling to overseas buyers, then buying elsewhere.” Some of these areas include St Georges Hill, Cheshire, Wentworth and Oxshott – areas that footballers are moving into, alongside Russians and other affluent Londoners.

Despite there being no signs of this knock-on effect last year, it is clear that the rise in prices in these areas is moving further afield. Figures produced by Knight Frank show that there has been an average 4% rise in property prices in Surrey and Buckinghamshire.

Some argue that the price difference isn’t between London and the rest of the country but the North and South with the North seeing significant reductions in house prices. An 11.5% fall was seen in property prices in Oldham last year, whilst more desirable areas such as Edinburgh also saw an average fall of 5%, leaving property prices 20% lower than those they peaked at in 2007.

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