Demand for London Housing ''Will Support Price Growth''

The residential real estate market in London is expected to see continued price growth over the next five years, due to strong demand that will far outweigh supply...

The residential real estate market in London is expected to see continued price growth over the next five years, due to strong demand that will far outweigh supply. This is the prediction made by Savills in its latest report into the state of the city's housing sector. According to the organisation, properties in London as a whole are likely to experience a 19 per cent rise in value, while assets in prime districts will increase in worth by 23 per cent, by 2017. This is because, despite an increase in the number of new homes coming on to the market - around 20,000 in the year to March 2012 - this is still below the minimum target of 30,000 per annum set by the mayor of London's office.

A further factor is the number of overseas buyers making property investments in the capital, with Savills revealing over 50 per cent of prime real estate assets have been purchased by equity-rich foreign investors in the past three years. Meanwhile, this demographic has taken around one-third (30 per cent) of the market share in non-prime locations in the capital. Despite the influx of international buyers, however, transaction levels in the London residential real estate sector remain 44 per cent lower than they were in 2007.

Constrained housing supply - especially at the affordable end of the market - is likely to improve the prospects of the rental sector in the city. Investors seeking residential properties that offer good returns may want to look to districts in the north-west of London, such as Hampstead, St John's Wood and Maida Vale, according to Cluttons. The firm recently highlighted these locations as providing significantly better yields than dwellings in other prime districts. Across the capital's most sought-after areas, average gross yields stood at 3.99 per cent in the second quarter of this year. By contrast, properties in Maida Vale were achieving 7.05 per cent in this period, while assets in St John's Wood and Hampstead generated yields of 6.69 per cent and 6.40 per cent respectively.

- Wednesday 11 July 2012

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