In spite of the UK’s recent economic downturn, property investment in London is continuing to attract foreign buyers, the main driver of growth in its property market. And thanks to a wide selection of areas to suit every type of property investor, this is a great location in which to set up a valuable asset.
It is unfortunate that the city’s property sector has not been in great shape for a long period of time; however, confidence in investment property London is beginning to return. Due to a rise in interest rates it is likely that many buyers will consider competitive mortgages, striking while the iron’s hot. But on the other hand, increases of VAT could discourage potential investors who are not in a rush to buy. This means they could put a hold on purchasing while they wait to see which way the market will sway.
April 2011 saw a 1% rise in stamp duty over properties with price tags over £1 million. This has sent the cost of moving rocketing to at least £10,000 and it is thought that the second half of the year could see interest in London property investment deteriorate. However, it is unlikely that this will put off European buyers keen to take advantage of the strength of the Euro before it weakens due to difficult sovereign debt issues.
Rental stock levels remain at an all time low; therefore demand is extremely high and severely restricted, with rents reaching well above peak levels. Unsurprisingly, those looking for investment properties London are doing so with caution and due diligence and many landlords are waiting for the market to stabilise in order to buy into a rising market and obtain the best capital growth. But with a large number of banks beginning to lend again, yields are set to look healthier than they have in previous months.
So what does the remainder of 2011 hold for London’s property sector? Due to economic uncertainty, the tightening of the sales market is likely to push more people into rental accommodation. These high levels of demand will exhaust any leftover stock; therefore landlords could be forced to sell up. Other than the return of last minute investors, it is difficult to predict where supply will come from. An average increase in rent of between 5% and 10% is a strong possibility.
The London property market is currently favouring landlords therefore tenants may need to adopt a competitive attitude to get the accommodation they want, by presenting themselves as the best bidder. This could result in landlords offering a lengthier tenancy which doesn’t require a break-out clause. The flexibility to move in earlier may also be required by tenants in London.