Properties in London on average now cost double the amount of a property anywhere else in the UK. According to figures from building society Nationwide, the difference in buying the average home in London and outside London is a staggering £183,000. The ‘London premium’ has grown so extreme that you don’t even have to move that far out of the capital to get a lot more space and value for your money and young people are finding it harder than ever to purchase their own properties. Annual house price inflation hit 9.5 per cent in March, which is the the biggest year on year jump for almost 4 years. London property prices soared 18.2 percent higher to an average 362,699 pounds compared to last year. The average house price in London is expected to be 500k by the end of the decade!
I know the question on everyones lips is WHY? Lets start off with this statistic. In January, London was named the city with the best real estate investment opportunities for foreign investors, overtaking last year’s first choice New York by the Association of Foreign Investors in Real Estate (AFIRE).
The demand for properties in the capital is as high as its ever been. Current residents within the capital are looking for places to move out of their parents houses, but have to compete with foreign investors who are looking to take advantage of how easy it is to invest, due to no restrictions being imposed on overseas investments, simplified taxation regime and the capital appreciation properties in London provide. Also because of the diversity of the residents within the capital it attracts a lot of European, Middle Eastern and Asian money. Last year 85% of new houses in London were sold to non-UK buyers, with investors from east Asia driving demand and nearly 50% of all properties bought with a value of £1 million or more were bought by investors who do not reside in the UK. Investors are flocking to property shows across the globe in which property developers are using to market their new builds and successfully so – houses are snapped up off-plan, discounted in cash creating a win-win scenario for both parties.
Another contributing factor to the housing bubble that we have on our hands is the current state of the economy. The Bank of England base rate set at 0.5% which has not really given the incentive for your average geezer to put his Uncle Bens (£10) in an ISA which wouldn’t generate him much… therefore more risks have been taken, with people realising the strong yields that can be realised from buy-to-let properties, especially now with extra low mortgage repayments. On average there have been around 75,000 mortgage approvals a month over the last few months across the United Kingdom (coincidentally it did dip to about 70,000 in February as a result of the aftermath of the floods which affected many parts of the UK). There is definitely more confidence in the property market, although that being said mortgage approvals are still short of the 90k average pre the 2007 crisis – cautious optimism perhaps?
With the above factors taken into consideration, the future for Property prices in the short, medium and long term is certainly a topic of interest…that is if the Bank of England do as predicted and increase the base rate to 2%. One could also question the effect it will have on not just Londoners, but the UK in general. Will the bubble burst? Will the market confidence be short lived? If so, will you be able to capitalise and make money from it? only time will tell….. Now all those lectures my parents have given me make sense