London Offers Considerable Real Estate Investment Opportunity

Real estate investment opportunities are abundant in the city of London, according to the Global Property Guide. Residential investors are well placed to capitalise on the current housing shortage...

Real estate investment opportunities are abundant in the city of London, according to the Global Property Guide. Residential investors are well placed to capitalise on the current housing shortage, which could potentially double rental prices in the medium term. According to the UK government, household numbers in London will expand between 34,000 and 38,000 each year until 2028. However, the current number of homes being delivered annually is approximately 21,000.

This means demand is higher than supply, driving up rental prices in the medium term - a trend that could prove lucrative for those looking to invest in apartment block and home rentals. Michael Ball of the University of Reading, who wrote the report Renting in London: the coming boom' for Cluttons, claims this is compounded by the fact that most people are attracted by rentals in the capital, because high prices and tight loan approvals make direct purchase unattractive. Conversely, flexible terms are available for rentals.

Nearly two thirds of households rent in inner London, while 40 per cent rent in outer areas. This popularity means that average rents could grow by five per cent, according to Mr Ball, trouncing average house price yields of four per cent annually.

Lynn Hilton, partner for residential lettings at Cluttons, commented: "The private rented sector feels the strong pressures of a growing population and workforce, being both the first point of contact and the safety option for many people searching for housing.

"New jobs being created in London are increasingly for well paid and highly qualified staff. Those tenants in the higher income groups, including families, will be a growing component of the rental market, seeking good quality accommodation over longer periods. The pressure of demand from tenants wanting to live in the city will underpin rental growth at a level ahead of the historic long term trend."

However, Research by the Global Property Guide revealed that rental prices in the middle market segment may not experience the positive growth expected elsewhere. Thus far, average gross rental yields for the middle market have been lower this year, registering between 3.19 per cent and 3.91 per cent, compared to 2011's impressive 4.31 per cent to 4.36 per cent.

- Monday 12 November 2012

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