Table of Contents
- Investing in The Property Market In London
- How Does The Property Market In London Work?
- What Factors Affect The Property Market In London?
- Is London A Good Place To Invest In The Property Market?
- Will Property Prices In London Go Down?
- London Property Market FAQ
- Commercial Property Market In London
- How Does The Property Market Affect The Economy?
Investing in The Property Market In London
If you are thinking about buying a new house or selling your current one, it is easy to be influenced by media reports about the property market. The information contained in reports about the boom and bust in the property market reflects national statistics but may not be relevant to your particular area. If, for example, you read that the property market has increased or decreased by some percentage points you could well surmise that your own property has done the same.
In reality values of properties around the UK are ultimately influenced by local factors and these factors are even more significant to the property market in London. Even in an unstable environment when both Brexit and Coronavirus affect prices, some analysts are predicting that property values in London will rise by up to 20% by 2025. The housing supply in the UK and particularly in London is low and this is contributing to the constant rise in property values.
How Does The Property Market In London Work?
Like all other markets, the property market in London relies on the laws of supply and demand. Currently, demand is greater than supply and this is contributing to the rising price of houses and other types of properties in the city. London is known as a safe haven for property investors and although times are uncertain, the economy is relatively strong. Many overseas investors from places like Hong Kong view London as the go-to place to invest money. Cuts to stamp duty tax that are in place until April 2021 have also contributed to the wave of property transactions in London.
There are other reasons behind the buoyant state of the property market in London. The large amount of young professional people who need a rental property has made the city even more attractive as a means of achieving a regular income.
What Factors Affect The Property Market In London?
Factors that affect property markets are very similar throughout the UK. Economic growth which creates a real rise in incomes contributes to more spending. When people have more money in their pockets they will think about buying a larger and more expensive property especially if house prices and rising and they do not want to get left behind.
Consumer confidence also contributes to rising property prices. When there is optimism in the markets, investors are more eager to take out higher mortgages. Interest rates are another factor that can affect the property market. Since the financial crisis of 2007/8, interest rates have remained consistently low making it much cheaper to borrow to buy property. However, this can be offset by a lack of available mortgages which creates a shortage of opportunities to finance a property purchase.
Demand for properties is also an influential factor and this may be created by more single person households due to young people leaving home or couples getting divorced. A rise in immigration and an increase in life expectancy are two other factors that have created a demand for more properties.
Is London A Good Place To Invest In The Property Market?
London has been and continues to be a good place to invest in property. The thriving job market and strong economy are just two of the reasons why people flock to live in the city. The average price of a property in London stands at around £600,000. Flats for sale in London start at around £420,000 and an average detached house can be purchased for around £890,000.
The current relaxation of stamp duty taxes has also made London one of the most buoyant property markets in the world. Although the cost of rentals in London has fallen slightly in 2020, a rented room in shared accommodation can still cost as much as £730 per month. Clearly, there is scope to receive an excellent annual income from investment in a property although finding cheap property in London has become increasingly difficult over the last two decades.
Savvy property buyers can save even more by making purchases at London property auctions although great care must be taken. Property auctions in the capital can be bust and very competitive with houses and flats often greatly exceeding their predicted sale prices.
Will Property Prices In London Go Down?
No one can predict the future of any property market but some experts have indicated that there will be a steady rise of up to 2.5% in 2020 in London property prices. The increase of first time house buyers that is being experienced over the rest of the UK is unlikely to hit London simply because prices are already out of reach for most first time buyers.
The Office of Budget Responsibility has made a prediction of a 1% decrease in prices due to restrictions imposed by the coronavirus. However, other experts from large estate agents believe that property prices throughout the UK will make a strong recovery with London seeing house prices up by as much as between 3% and 6% in the next couple of years.
London Property Market FAQ
Will The Property Market In London Go Up?
Figures show that at the end of 2020 there will have been a rise of 2.5% in the value of property in London. Prices in the city over the last 10 years have risen by 53% and some real estate agents are predicting a 1% rise in 2021 followed by 1.5% in 2022 and 3% in 2023. This would make a four year growth of 5.5%. These figures are speculative.
Why Are Property Prices So High In London?
The trend for younger people to move to the capital along with the excellent transport links and opportunities for jobs has made the property market in London very expensive. London is very popular with tourists so an investment in the city is a good way to achieve an annual income from rentals. London is deemed to be exclusive and has a lack of smaller properties and these factors have also contributed to the high prices.
What Is Next For The Property Market In London?
There are lots of predictions of what happens next to the property market in London. Many forecasters are predicting that values will continue to rise in spite of the difficulties experienced during 2020. Factors that could affect prices are job losses, an increase in consumer debt and changes that occur due to Brexit. Overall property prices are expected to continue to rise in the long term.
Commercial Property Market In London
Investment in commercial property in London has often exceeded that of other cities due to the popularity by overseas investors. London has a good track record when it comes to the commercial property marketplace. However, the unprecedented events of 2020 have made a difference to this most reliable commercial market.
Currently the value of commercial properties in London is holding up as investors still view the capital city as a safe haven for their money. Unlike the period of financial crisis which created so much debt, owners have the option of selling or holding on until the markets settle down. London is still being viewed as a good value commercial investment and compares favourably with other key European cities.
How Does The Property Market Affect The Economy?
The buying and selling of houses is linked closely to spending by consumers. When the property market in London is buoyant and prices are rising, consumers feel more confident spending on retail goods and other services. During a period of boom in house prices, consumers may well borrow against the equity in their property for renovation, to pay off debts or to buy pricier goods like cars or boats.
During a downturn in the property market the opposite happens, with consumers spending less and putting off large purchases until they feel confident that their properties are not losing value. Investment in property is a crucial part of the economy which contributes directly to the Gross Domestic Product (GDP). During good economic period when more houses are being built, there is also investment in infrastructure, shops and other local services which increases the GDP.
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